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GOVERMMENT  DOCUMENTS 

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FOREIGN  AND  MILITARY 
INTELLIGENCE 


BOOK  I 


FINAL  REPORT 

OF  THE 

SELECT  COMMITTEE 
TO  STUDY  GOVERNMENTAL  OPERATIONS 

WITH   RESPECT  TO 

INTELLIGENCE  ACTIVITIES 
UNITED  STATES  SENATE 

TOGETHER  WITH 

ADDITIONAL,  SUPPLEMENTAL,  AND  SEPARATE 

VIEWS 


April  26  ( legislative  day,  April  14 ) ,  1976 


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-983  O  WASHINGTON   :    1976 


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SENATE  SELECT  COMMITTEE  TO  STUDY  GOVERNMENTAL  OPERATIONS 
WITH  RESPECT  TO  INTELLIGENCE  ACTIVITIES 

FRANK  CHURCH,  Idaho,  Chairman 
JOHN  G.  TOWER,  Texas,  Vice  Chairman 
PHILIP  A.  HART,  Michigan  HOWARD  H.  BAKER,  Jr.,  Tennessee 

WALTER  F.  MONDALE,  Minnesota  BARRY  GOLDWATER,  Arizona 

WALTER  D.  HUDDLESTON,  Kentucliy  CHARLES  McC.  MATHIAS,  Jr.,  Maryland 

ROBERT  MORGAN,  North  Carolina  RICHARD  S.  SCHWEIKER,  Pennsylvania 

GARY  HART,  Colorado 

William  G.  Miller,  Staff  Director 

Frederick  A.  O.  Schwarz,  Jr.,  Chief  Counsel 

Curtis  R.  Smothers,  Counsel  to  the  Minority 

Audrey  Hatry,  Clerk  of  the  Committee 

(n) 


LETTER  OF  TRANSMITTAL 

(By  Senator  Frank  Church,  Chairman  of  the  Senate  Select  Committee 
to  Study  Governmental  Operations  With  Eespect  to  Intelligence 
Activities) 

On  January  27,  1975,  the  Senate  established  a  Select  Committee  to 
conduct  an  investigation  and  study  of  the  intelligence  activities  of  the 
United  States.  After  15  months  of  intensive  work,  I  am  pleased  to 
submit  to  the  Senate  this  volume  of  the  Final  Report  of  the  Com- 
mittee relating  to  foreign  and  military  intelligence.  The  inquiry  arises 
out  of  allegations  of  abuse  and  improper  activities  by  the  intelligence 
agencies  of  the  United  States,  and  great  public  concern  that  the 
Congress  take  action  to  bring  the  intelligence  agencies  under  the 
constitutional  framework. 

The  members  of  the  Select  Committee  have  worked  diligently  and 
in  remarkable  harmony.  I  want  to  express  my  gratitude  to  the  Vice 
Chairman,  Senator  John  Tower  of  Texas,  for  his  cooperation  through- 
out and  the  able  assistance  he  has  given  me  in  directing  this  most 
diificult  task.  While  every  member  of  the  Committee  has  made  im- 
portant contributions,  I  especially  want  to  thank  Senator  Walter  D. 
Huddleston  of  Kentucky  for  the  work  he  has  done  as  Chairman  of 
the  Foreign  and  Military  Subcommittee.  His  direction  of  the  Sub- 
committee, working  with  Senator  Charles  McC.  Mathias  of  Mary- 
land, Senator  Gary  Hart  of  Colorado  and  Senator  Barry  Goldw^ater 
of  Arizona,  has  been  of  immeasurable  help  to  me  in  bringing  this 
enormous  undertaking  to  a  useful  and  responsible  conclusion. 

Finally,  I  wish  to  thank  the  staff  for  the  great  service  they  have 
performed  for  the  Committee  and  for  the  Senate  in  assisting  the 
members  of  the  Committee  to  carry  out  the  mandate  levied  by  Senate 
Resolution  21.  The  quality,  integrity  and  devotion  of  the  staff  has 
contributed  in  a  significant  way  to  the  important  analyses,  findings 
and  recommendations  of  the  Committee. 

The  volume  which  follows,  the  Report  on  the  Foreign  and  Military 
Intelligence  Activities  of  the  United  States,  is  intended  to  provide  to 
the  Senate  the  basic  information  about  the  intelligence  agencies  of 
the  TTnited  States  required  to  make  the  necessary  judgments  concern- 
ing the  role  such  agencies  should  play  in  the  future.  Despite  security 
considerations  which  have  limited  what  can  responsibly  be  printed  for 
public  release  the  information  which  is  presented  in  this  report  is  a 
reasonably  complete  picture  of  the  intelligence  activities  under- 
taken by  the  United  States,  and  the  problems  that  such  activities  pose 
for  constitutional  government. 

The  Findings  and  Recommendations  contained  at  the  end  of  this 
volume  constitute  an  agenda  for  action  which,  if  adopted,  would  go 
a  long  way  toward  preventing  the  abuses  that  have  occurred  in  the 
past  from  occurring  again,  and  would  assure  that  the  intelligence 
activities  of  the  United  States  will  be  conducted  in  accordance  with 
constitutional  processes. 

Frank  Church. 
(ni) 


NOTE 

The  Committee's  Final  Keport  has  been  reviewed  and  declassi- 
fied by  the  appropriate  executive  agencies.  These  agencies  submitted 
comments  to  the  Committee  on  security  and  factual  aspects  of  each 
chapter.  On  the  basis  of  these  comments,  the  Committee  and  staff 
conferred  with  representatives  of  the  agencies  to  determine  which 
parts  of  the  report  should  remain  classified  to  protect  sensitive  intel- 
ligence sources  and  methods. 

At  the  request  of  the  agencies,  the  Committee  deleted  three  chapters 
from  this  report :  "Cover,"  "Espionage,"  and  "Budgetary  Oversight." 
In  addition,  two  sections  of  the  chapter  "Covert  Action  of  the  CIA" 
and  one  section  of  the  chapter  "Department  of  State"  have  been  de- 
leted at  the  request  of  the  agencies.  Particular  passages  which  were 
changed  at  the  request  of  the  agencies  are  denoted  by  italics  and  a 
footnote.  Complete  versions  of  deleted  or  abridged  materials  are  avail- 
able to  Members  of  the  Senate  in  the  Committee's  classified  report 
under  the  provisions  of  S.  Res.  21  and  the  Standing  Rules  of  the 
Senate. 

Names  of  individuals  were  deleted  when,  in  the  Committee's  judg- 
ment, disclosure  of  their  identities  would  either  endanger  their  safety 
or  constitute  a  substantial  invasion  of  privacy.  Consequently,  footnote 
citations  to  testimony  and  documents  occasionally  contain  only  descrip- 
tions of  an  individual's  position. 

Appendix  Three,  "Soviet  Intelligence  Collection  and  Intelligence 
Against  the  United  States,"  is  derived  solely  from  a  classified  CIA 
report  on  the  same  subject  which  was  edited  for  security  considerations 
by  the  Select  Committee  staff. 

(IV) 


CONTENTS 


Page 

I.  INTRODUCTION 1 

A.  The  Mandate  of  the  Committee's  Inquiry 2 

B.  The  Purpose  of  the  Committee's  Findings  and  Recommenda- 

tions    4 

C.  The  Focus  and  Scope  of  the  Committee's  Inquiry  and  Ob- 

stacles Encountered 5 

D.  The  Historical  Context  of  the  Inquiry 8 

E.  The  Dilemma  of  Secrecy  and  Open  Constitutional  Govern- 

ment    11 

II.  THE   FOREIGN   AND    MILITARY   INTELLIGENCE   OPERA- 

TIONS OF  THE  UNITED  STATES:  AN  OVERVIEW 15 

A.  The  Basic  Issues:  Secrecy  and  Democracy 16 

B.  The  Scope  of  the  Select  Committee  Inquiry  into  Foreign  and 

Military  Intelligence  Operations 17 

C.  The  Intelligence  Process:  Theory  and  Reality 17 

D.  Evolution  cf  the  United  States  Intelligence  Community 19 

E.  The  Origins  cf  the  Postwar  Intelligence  Community 20 

F.  The  Response  to  the  Soviet  Threat 22 

G.  Korea:  The  Turning  Point 23 

H.  The  "Protracted  Conflict" 24 

I.     Third  World  Competition  and  Nuclear  Crisis 25 

J.    Technology  and  Tragedy 26 

K.  Thel970s 27 

L.    TheTaskAhead 28 

III.  THE     CONSTITUTIONAL     FRAMEWORK     FOR     INTELLI- 

GENCE ACTIVITIES 31 

A.  The  Joint  Responsibilities  of  the  Legislative  and  Executive 

Branches — Separation  of  Powers  and  Checks  and  Balances.-  31 

B.  The  Historical  Practice 33 

C.  The  Constitutional  Power  of  Congress  to  Regulate  the  Con- 

duct of  Foreign  Intelligence  Activity 38 

IV.  THE  PRESIDENT'S  OFFICE 41 

A.  The  National  Security  Council 42 

B.  Authorization  and  Control  of  Covert  Activities 48 

C.  Providing  the  Intelligence  Required  by  Policymakers 61 

D.  Advising  the  President  on  Intelligence  Issues 62 

E.  Allocating  Intelligence  Resources 65 

V.  THE   DIRECTOR   OF   CENTRAL   INTELLIGENCE 71 

A.  The  Producer  of  National  Intelligence 73 

B.  Coordinator  of  Intelligence  Activities 83 

C.  Director  of  the  CIA 94 

VI.  HISTORY  OF  THE   CENTRAL  INTELLIGENCE    AGENCY..  97 

A.  The  Central  Intelligence  Group  and  the  Central  Intelligence 

Agency:  1946-1952 99 

B.  The  Dulles  Era:  1953-1961 109 

C.  Change  and  Routinization:  1961-1970 115 

D.  The  Recent  Past:  1971-1975 121 

E.  Conclusion 124 

VII.  THE    CENTRAL   INTELLIGENCE   AGENCY:    STATUTORY 

AUTHORITY 127 

A.  Clandestine  Collection  of  Intelligence 128 

B.  Covert  Action 131 

C.  Domestic  Activities 135 

(V) 


VI 

Page 

VIII.  COVERT  ACTION 141 

A.  Evolution  of  Covert  Action 143 

B.  Congressional  Oversight 149 

C.  Findings  and  Conclusions 152 

IX.  COUNTERINTELLIGENCE 163 

A.  Counterintelligence:  An  Introduction 163 

B.  Current  Issues  in  Counterintelligence 171 

C.  Conclusions 177 

X.  THE    DOMESTIC     IMPACT    OF    FOREIGN     CLANDESTINE 

OPERATIONS:  THE  CIA  AND  ACADEMIC  INSTITUTIONS, 

THE  MEDIA,  AND  RELIGIOUS  INSTITUTIONS 179 

A.  Covert  Use  of  Academic  and  Voluntary  Organizations 181 

B.  Covert  Relationships  with  the  United  States  Media 191 

C.  Covert  Use  of  U.S.  Religious  Groups 201 

XL  PROPRIETARIES 205 

A.  Overview 206 

B.  Structure 207 

C.  Operation  of  Proprietaries 234 

D.  The  Disposal  of  Proprietaries 236 

E.  Financial  Aspects 247 

F.  Some  General  Considerations 251 

XII.  CIA  PRODUCTION  OF  FINISHED  INTELLIGENCE 257 

A.  Evolution  of  the  CIA's  Intelligence  Directorate 259 

B.  The  Intelligence  Directorate  Today 265 

C.  The  Relationship  Between  InteUigence  and  Policy 266 

D.  The  Limits  of  Intelligence 268 

E.  The  Personnel  System 269 

F.  Recruitment  and  Training  of  Analysts 270 

G.  The  Intelligence  Culture  and  Analytical  Bias 270 

H.  The   Nature  of  the  Production  Process:   Consensus  Versus 

Competition 271 

I.  The  "Current  Events"  Syndrome 272 

J.  Innovation 273 

K.  Overload  on  Analysts  and  Consumers 274 

L.  Quality  Control 276 

M.  Consumer  Guidance  and  Evaluation 276 

N.  The  Congressional  Role 277 

XIII.  THE  CIA's  INTERNAL  CONTROLS:  THE  INSPECTOR  GEN- 

ERAL AND  THE  OFFICE  OF  GENERAL  COUNSEL 279 

A.  The  General  Counsel 280 

B.  The  Office  of  the  Inspector  General 289 

C.  Internal  and  External  Review  of  the  Office  of  the  Inspector 

General 303 

XIV.  THE  DEPARTMENT  OF  STATE 305 

A.  Origins  of  the  State  Department  Intelligence  Function 305 

B.  Command  and  Control 308 

C.  Support  Communications 315 

D.  Production  of  Intelligence 315 

XV.  DEPARTMENT  OF  DEFENSE 319 

A.  Objectives  and  Organization  of  the  Defense  Intelligence  Com- 

munity   320 

B.  The  Defense  Intelligence  Budget 328 

C.  Management    Problems    of   the    Defense    Intelligence    Com- 

munity   341 

D.  Agencies  and  Activities  of  Special  Interest 349 

E.  Military  Counterintelligence  and  Investigative  Agencies 355 

F.  Chemical  and  Biological  Activities 359 

G.  Meeting  Future  Needs  in  Defense  Intelligence 363 


VII 

XVI.  DISCLOSURE  OF  BUDGET  INFORMATION   ON   THE  IN-  Page 

TELLIGENCE  COMMUNITY 367 

A.  The  Present  Budgetary  Process  for  Intelligence  Community 

Agencies  and  Its  Consequences 367 

B.  The  Constitutional  Requirement 369 

C.  Alternatives  to  Concealing  Intelligence  Budgets  from  Congress 

and  the  PubHc 374 

D.  The   Effect   Upon   National   Security   of  Varying   Levels   of 

Budget  Disclosure 376 

E.  The    Argument   that    Publication   of   Any   Information   will 

Inevitably  Result  in  Demands  for  Further  Information 381 

F.  The  Argument  that  the  United  States  Should  Not  Publish 

Information  on  Its  Intelligence  Budget  Because  No  Other 

Government  in  the  World  Does 383 

G.  Summary  and  Conclusion 384 

XVII.  TESTING   AND   USE   OF   CHEMICAL   AND   BIOLOGICAL 

AGENTS  BY  THE  INTELLIGENCE  COMMUNITY 385 

A.  The  Programs  Investigated 387 

B.  CIA  Drug  Testing  Programs 392 

C.  Covert  Testing  on  Human  Subjects  by  Military  Intelligence 

Groups 411 

D.  Cooperation  and  Competition  Among  the  Intelligence  Agen- 

cies, and  Between  the  Agencies  and  Other  Individuals  and 

Institutions 420 

XVIII.  SUMMARY:  FINDINGS  AND  RECOMMENDATIONS 423 

A.  Introduction 423 

B.  General  Findings 424 

C.  The  1947  National  Security  Act  and  Related  Legislation 426 

D.  The  National  Security  Council  and  the  Office  of  the  President-  427 

E.  The  Director  of  Central  Intelligence 432 

F.  The  Central  Intelligence  Agency 435 

G.  Reorganization  of  the  Intelligence  Community 449 

H.  CIA  Relations  with  United  States  Institutions  and  Private 

Citizens 451 

I.  Proprietaries  and  Cover 456 

J.  Intelligence  Liaison 459 

K.  The  General  Counsel  and  the  Inspector  General 459 

L.  The  Department  of  Defense 462 

M.  The  Department  of  State  and  Ambassadors 466 

N.  Oversight  and  the  Intelligence  Budget 469 

O.  Chemical  and  Biological  Agents  and  the  Intelligence  Com- 
munity   471 

P.   General  Recommendations 472 

APPENDIX  I:  Congressional  Authorization  for  the  Central  InteUigence 

Agency  to  Conduct  Covert  Action 475 

A.  The  National  Security  Act  of  1947 476 

B.  The  CIA  Act  of  1949 492 

C.  The  Provision  of  Funds  to  the  CIA  by  Congress 496 

D.  The  Holtzman  and  Abourezk  Amendments  of  1974 502 

E.  The  Hughes-Ryan  Amendment 505 

F.  Conclusion 508 

APPENDIX  II:  Additional  Covert  Action  Recommendations 511 

A.  Statement  of  Clark  M.  Clifford 512 

B.  Statement  of  Cyrus  Vance 516 

C.  Statement  of  David  A.  Phillips 518 

D.  Prepared  Statement  of  Morton  H.  Halperin 520 

E.  Recommendations   of   the   Harvard   University   Institute   of 

Politics,  Study  Group  on  Intelligence  Activities 524 

F.  Recommendations  of  the  House  Select  Committee  on  Intelli- 

gence Concerning  Covert  Action ^^ 533 

G.  Article  from  Foreign  Affairs  by  Harry  Rositzke:  America's 

Secret  Operations :  A  Perspective 534 

H.  Article  from  Saturday  Review  by  Tom  Braden:  What's  Wrong 

with  the  CIA? _-  547 

I.  Recommendations  of  the  Commission  on  the  Organization  of 
the  Government  for  the  Conduct  of  Foreign  Policy  (the 

Murphy  Commission)  Concerning  Covert  Action 554 


vm 

APPENDIX  III:  Soviet  Intelligence  Collection  and  Operations  Against  Page 

the  United  States 557 

A.  Introduction 557 

B.  Organization  and  Structure 558 

C.  The  GRU 560 

D.  The  Scope  and  Methods  of  Anti-United  States  Operations  by 

the  KGB  and  the  GRU 561 

E.  Eastern  European  Security  and  Intelligence  Services 561 

ADDITIONAL  VIEWS  OF  SENATOR  FRANK  CHURCH 563 

ADDITIONAL  VIEWS   OF   SENATORS   WALTER   F.    MONDALE, 

GARY  HART,  AND  PHILIP  HART 567 

INTRODUCTION   TO  SEPARATE  VIEWS  OF  SENATORS  JOHN 

G.    TOWER,    HOWARD    H.    BAKER,    JR.    AND    BARRY    M. 

GOLD  WATER 571 

SEPARATE  VIEWS  OF  SENATOR  JOHN   G.  TOWER 573 

INDIVIDUAL  VIEWS  OF  SENATOR  BARRY  GOLDWATER 577 

SEPARATE  VIEWS  OF  HOWARD  H.  BAKER,  JR 594 

SUPPLEMENTAL      VIEWS      OF      SENATOR      CHARLES      McC. 

MATHIAS,  JR 609 

ADDITIONAL  VIEWS  OF  SENATOR  RICHARD  S.  SCHWEIKER_  615 
GLOSSARY  OF  SELECTED  INTELLIGENCE  TERMS  AND  LIST 

OF  ABBREVIATIONS 617 

NATIONAL  INTELLIGENCE  CHARTS 634 

SENATE  RESOLUTION  21 636 

STAFF  LIST 649 


I.  INTRODUCTION 

The  Senate  Select  Committee  on  Intelligence  Activities  has  con- 
ducted a  fifteen  month  long  inquiry,  the  first  major  inquiry  into  intelli- 
gence sinbe  World  War  II.  The  inquiry  arose  out  of  allegations  of 
substantial,  even  massive  wrong-doin^  within  the  "national  intelli- 
gence" system.^  This  final  report  provides  a  history  of  the  evolution 
of  intelligence,  an  evaluation  of  the  intelligence  system  of  the  United 
States,  a  critique  of  its  problems,  recommendations  for  legislative 
action  and  recommendations  to  the  executive  branch.  The  Committee 
believes  that  its  recommendations  will  provide  a  sound  framework  for 
conducting  the  vital  intelligence  activities  of  the  United  States  in  a 
manner  which  meets  the  nation's  intelligence  requirements  and  pro- 
tects the  liberties  of  American  citizens  and  the  freedoms  which  our 
Constitution  guarantees. 

The  shortcomings  of  the  intelligence  system,  the  adverse  effects  of 
secrecy,  and  the  failure  of  congressional  oversight  to  assure  adequate 
accountability  for  executive  branch  decisions  concerning  intelligence 
activities  were  major  subjects  of  the  Committee's  inquiry.  Equally  im- 
portant to  the  obligation  to  investigate  allegations  of  abuse  was  the 
duty  to  review  systematically  the  intelligence  community's  overall 
activities  since  1945,  and  to  evaluate  its  present  structure  and 
performance. 

An  extensive  national  intelligence  system  has  been  a  vital  part  of 
the  United  States  government  since  1941.  Intelligence  information 
has  had  an  important  influence  on  the  direction  and  development 
of  American  foreign  policy  and  has  been  essential  to  the  maintenance 
of  our  national  security.  The  Committee  is  convinced  that  the  United 
States  requires  an  intelligence  system  which  will  provide  policy- 
makers with  accurate  intelligence  and  analysis.  We  must  have  an  early 
warning  system  to  monitor  potential  military  threats  by  countries 
hostile  to  United  States  interests.  We  need  a  strong  intelligence  system 
to  verify  that  treaties  concerning  arms  limitation  are  being  honored. 
Information  derived  from  the  intelligence  agencies  is  a  necessary  in- 
gredient in  making  national  defense  and  foreign  policy  decisions.  Such 
information  is  also  necessary  in  countering  the  efforts  of  hostile  intel- 
ligence services,  and  in  halting  terrorists,  international  drug  traffickers 
and  other  international  criminal  activities.  Within  this  country  cer- 
tain carefully  controlled  intelligence  activities  are  essential  for  ef- 
fective law  enforcement. 

The  United  States  has  devoted  enormous  resources  to  the  creation 
of  a  national  intelligence  system,  and  today  there  is  an  awareness  on 
the  part  of  many  citizens  that  a  national  intelligence  system  is  a  per- 

^  National  intelligence  includes  but  is  not  limited  ito  the  CIA,  NSA,  DIA,  ele- 
ments within  the  Department  of  Defense  for  the  collection  of  intelligence  through 
reconnaissance  programs,  the  Intelligence  Division  of  the  FBI,  and  the  intel- 
ligence elements  of  the  State  Department  and  the  Treasury  Department. 

(1) 


manent  and  necessary  component  of  our  government.  The  system's 
value  to  the  country  has  been  proven  and  it  will  be  needed  for  the 
foreseeable  future.  But  a  major  conclusion  of  this  inquiry  is  that  con- 
gressional oversight  is  necessary  to  assure  that  in  the  future  our 
intelligence  community  functions  effectively,  within  the  framework 
of  the  Constitution. 

The  Committee  is  of  the  view  that  many  of  the  unlawful  actions 
taken  by  officials  of  the  intelligence  agencies  were  rationalized  as 
their  public  duty.  It  was  necessary  for  the  Committee  to  understand 
how  the  pursuit  of  the  public  good  could  have  the  opposite  effect. 
As  Justice  Brandeis  observed : 

Experience  should  teach  us  to  be  most  on  our  guard  to  protect 
liberty  when  the  Government's  purposes  are  benificent.  Men 
born  to  freedom  are  naturally  alert  to  repel  invasion  of  their 
liberty  by  evil-minded  rulers.  The  greatest  dangers  to  liberty 
lurk  in  insidious  encroachment  by  men  of  zeal,  well-meaning 
but  without  understanding.^ 

A.  The  Mandate  of  the  Committee's  Inquiry 

On  January  27,  1975,  Senate  Resolution  21  established  a  select  com- 
mittee "to  conduct  an  investigation  and  study  of  governmental  opera- 
tions with  respect  to  intelligence  activities  and  of  the  extent,  if  any, 
to  which  illegal,  improper,  or  unethical  activities  were  engaged  in  by 
any  agency  of  the  Federal  Government."  Senate  Resolution  21  lists 
specific  areas  of  inqury  and  study : 

( 1 )  Whether  the  Central  Intelligence  Agency  has  conducted 
an  illegal  domestic  intelligence  operation  in  the  United  States. 

(2)  The  conduct  of  domestic  intelligence  or  counterintelli- 
gence operations  against  United  States  citizens  by  the  Federal 
Bureau  of  Investigation  or  any  other  Federal  agency. 

(3)  The  origin  and  disposition  of  the  so-called  Huston 
Plan  to  apply  United  States  intelligence  agency  capabilities 
against  individuals  or  organizations  within  the  United 
States. 

(4)  The  extent  to  which  the  Federal  Bureau  of  Investiga- 
tion, the  Central  Intelligence  Agency,  and  other  Federal  law 
enforcement  or  intelligence  agencies  coordinate  their  respec- 
tive activities,  any  agreements  which  govern  that  coordina- 
tion, and  the  extent  to  which  a  lack  of  coordination  has  con- 
tributed to  activities  or  actions  which  are  illegal,  improper, 
inefficient,  unethical,  or  contrary  to  the  intent  of  Congress. 

(5)  The  extent  to  which  the  operation  of  domestic  intelli- 
gence or  counterintelligence  activities  and  the  operation  of 
any  other  activities  within  the  United  States  by  the  Central 
Intelligence  Agency  conforms  to  the  legislative  charter  of 
that  Agency  and  the  intent  of  the  Congress. 

(6)  The  past  and  present  interpretation  by  the  Director  of 
Central  Intelligence  of  the  responsibility  to  protect  intelli- 
gence sources  and  methods  as  it  relates  to  that  provision  of 
the  National  Security  Act  of  1947  which  provides  ".  .  . 

''Olmstead  v.  United  States,  277  U.S.  438,  479  (1928). 


that  the  agency  shall  have  no  police,  subpena,  law  enforce- 
ment powers,  or  internal  security  functions.  .  .  ."  ^ 

(7)  The  nature  and  extent  of  executive  branch  oversight 
of  all  United  States  intelligence  activities. 

(8)  The  need  for  specific  legislative  authority  to  govern 
the  operations  of  any  intelligence  agencies  of  the  Federal 
Government  now  existing  without  that  explicit  statutory  au- 
thority, including  but  not  limited  to  agencies  such  as  the 
Defense  Intelligence  Agency  and  the  National  Security 
Agency. 

(9)  The  nature  and  extent  to  which  Federal  agencies  co- 
operate and  exchange  intelligence  information  and  the  ade- 
quacy of  any  regulations  or  statutes  which  govern  such 
cooperation  and  exchange  of  intelligence  information. 

(10)  The  extent  to  which  United  States  intelligence  agen- 
cies are  governed  by  Executive  Orders,  rules,  or  regulations 
either  published  or  secret  and  the  extent  to  which  those 
Executive  Orders,  rules,  or  regulations  interpret,  expand,  or 
are  in  conflict  with  specific  legislative  authority. 

(11)  The  violation  or  suspected  violation  of  any  State 
or  Federal  statute  by  any  intelligence  agency  or  by  any  per- 
son by  or  on  behalf  of  any  intelligence  agency  of  the  Fed- 
eral Government  including  but  not  limited  to  surreptitious 
entries,  surveillance,  wiretaps,  or  eavesdropping,  illegal  open- 
ing of  the  United  States  mail,  or  the  monitoring  of  the  United 
States  mail. 

(12)  The  need  for  improved,  strengthened,  or  consoli- 
dated oversight  of  United  States  intelligence  activities  by  the 
Congress. 

(13)  Whether  any  of  the  existins:  laws  of  the  United  States 
are  inadequate,  either  in  their  provisions  or  manner  of  en- 
forcement, to  safeguard  the  rights  of  American  citizens,  to 
improve  executive  and  legislative  control  of  intelligence  and 
related  activities,  and  to  resolve  uncertainties  as  to  the  au- 
thoritv  of  United  States  intelligence  and  related  agencies. 

(14)  Whether  there  is  unnecessary  duplication  of  expendi- 
ture and  effort  in  the  collection  and  processing  of  intelligence 
information  by  United  States  agencies. 

(15)  The  extent  and  necessity  of  overt  and  covert  intelli- 
gence activities  in  the  TTnited  States  and  abroad. 

In  addressing  these  mandated  areas  of  inquiry,  the  Committee  has 
focused  on  three  broad  questions : 

1.  Whether  intelligence  activities  have  functioned  in  ac- 
cordance with  the  Constitution  and  the  laws  of  the  United 
States. 

2.  Whether  the  structure,  programs,  past  history,  and 
present  policies  of  the  American  intelligence  svstem  have 
served  the  national  interests  in  a  manner  consistent  with 
declared  national  policies  and  purposes. 

^50  U.S.r.  403rd)  (3)  :  Appendix  B,  Senate  Select  Committee  Hearings  (here- 
inafter cited  as  hearings),  Vol  7,  p.  210. 


3.  Whether  the  processes  through  which  the  intelligence 
agencies  have  been  directed  and  controlled  have  been  ade- 
quate to  assure  conformity  with  policy  and  the  law. 

Over  the  past  vo}\r,  the  Committee  and  its  sfaff  have  carefully 
examined  the  intelligence  structure  of  the  United  States.  Consider- 
able time  and  effort  have  been  devoted  in  order  to  understand  what 
has  been  done  by  the  United  States  Government  in  secrecy  during  the 
thirty-year  period  since  the  end  of  World  War  II.  It  is  clear  to  the 
Committee  that  there  are  many  necessary  and  proper  governmental 
activities  that  must  be  conducted  in  secrecy.  Some  of  these  activities 
affect  the  security  and  the  very  existence  of  the  nation. 

It  is  also  clear  from  the  Committee's  inquirv  that  intelligence 
activities  conducted  outside  the  framework  of  the  Constitution  and 
statutes  can  undermine  the  treasured  values  guaranteed  in  the  Bill 
of  Rights.  Further,  if  the  intelligence  agencies  act  in  ways  inimical 
to  declared  national  purnoses,  they  damage  the  reputation,  power,  and 
influence  of  the  United  States  abroad. 

The  Committee's  investigation  has  documented  that  a  number  of 
actions  committed  in  the  name  of  "national  security"  were  inconsistent 
with  declared  policy  and  the  law.  Hearings  have  been  held  and  the 
Committee  has  issued  reports  on  alleged  assassination  plots,  covert 
action  in  Chile  and  the  interception  of  domestic  communications  by 
the  National  Security  Agency  (NSA).  Regrettably,  some  of  these 
abuses  cannot  be  regarded  as  aberrations. 

B.  The  Purpose  of  the  Committee's  Findings  and 
Recommendations 

It  is  clear  that  a  primary  task  for  any  successor  oversight  committee, 
and  the  Congress  as  a  whole,  will  be  to  frame  basic  statutes  necessary 
under  the  Constitution  within  which  the  intelligence  agencies  of  the 
United  States  can  function  efficiently  under  clear  guidelines.  Charters 
delineating  the  missions,  authorities,  and  limitations  for  some  of  the 
United  States  most  important  intelligence  agencies  do  not  exist.  For 
example,  there  is  no  statutory  authority  for  the  NSA's  intelligence 
activities.  Where  statutes  do  exist,  as  with  the  CIA,  they  are  vague  and 
have  failed  to  provide  the  necessary  guidelines  defining  missions  and 
limitations. 

The  Committee's  investigation  has  demonstrated,  moreover,  that  the 
lack  of  legislation  has  had  the  effect  of  limiting  public  debate  upon 
some  important  national  issues. 

The  CIA's  broad  statutory  charter,  the  1947  National  Security  Act, 
makes  no  specific  mention  of  covert  action.  The  CIA's  former  General 
Counsel,  Lawrence  Houston,  who  was  deeply  involved  in  drafting  the 
1947  Act,  wrote  in  September  1947,  "we  do  not  believe  that  there  was 
any  thought  in  the  minds  of  Congress  that  the  CIA  under  [the 
authority  of  the  National  Securitv  Act]  would  take  positive  action 
for  subversion  and  sabotage."  *  Yet,  a  few  months  after  enactment 
of  the  1947  legislation,  the  National  Security  Council  authorized 
the  CIA  to  engage  in  covert  action  programs.  The  provision  of  the 
Act  often  cited  as  authorizing  CIA  covert  activities  provides  for  the 
Agency : 


"Memorandum  from  CIA  General  Council  Lawrence  Houston  to  DCI  Hillen- 
koetter,  9/25/47. 


...  to  perform  such  other  functions  and  duties  related  to 
intelligence  affecting  the  national  security  as  the  National 
Security  Council  may  from  time  to  time  direct.'** 

Secret  Executive  Orders  issued  by  the  NSC  to  carry  out  covert  action 
programs  were  not  subject  to  congressional  review.  Indeed,  until  re- 
cent years,  except  for  a  few  members,  Congress  was  not  fully  aware  of 
the  existence  of  the  so-called  "secret  charter  for  intelligence  activities." 
Those  members  who  did  know  had  no  institutional  means  for  dis- 
cussing their  knowledge  of  secret  intelligence  activities  with  their 
colleagues.  The  problem  of  how  the  Congress  can  effectively  us©  secret 
knowledge  in  its  legislative  processes  remains  to  be  resolved.  It  is  the 
Committee's  view  that  a  strong  and  effective  oversight  committee  is 
an  essential  first  step  that  must  be  taken  to  resolve  this  fundamental 
issue. 

C.  The  Focus  and  Scope  of  the  Committee's  Inquiry  and  Obstacles 

Encountered 

The  inquiry  mandated  in  S.  Res.  21  falls  into  two  main  categories. 
The  first  concerns  allegations  of  wrong-doing.  The  nature  of  the  Com- 
mittee's inquiry  into  these  matters  tends,  quite  properly,  to  be  akin  to 
the  investigations  conducted  by  Senate  and  Congressional  committees 
in  the  past.  We  decided  from  the  outset,  however,  that  this  committee 
is  neither  a  court,  nor  a  law  enforcement  agency,  and  that  while  using 
many  traditional  congressional  investigative  techniques,  our  inquiry 
has  served  primarily  to  illustrate  the  problems  before  Congress  and  the 
countiy.  The  Justice  Department  and  the  courts  in  turn  have  their 
proper  roles  to  play. 

The  second  category  of  inquiry  has  been  an  examination  of  the 
intelligence  agencies  themselves.  The  Committee  wished  to  learn 
enough  about  their  past  and  present  activities  to  make  the  legislative 
judgments  required  to  assure  the  American  people  that  whatever 
necessary  secret  intelligence  activities  were  being  undertaken  were 
subject  to  constitutional  processes  and  were  being  conducted  in  as 
effective,  humane,  and  efficient  a  manner  as  possible. 

The  Committee  focused  on  many  issues  affecting  the  intelligence 
agencies  which  had  not  been  seriously  addressed  since  our  peacetime 
intelligence  system  was  created  in  1947.  The  most  important  questions 
relating  to  intelligence,  such  as  its  value  to  national  security  purposes 
and  its  cost  and  quality,  have  been  carefully  examined  over  the  past 
year.  Although  some  of  the  Committee's  findings  can  be  reported  to 
the  public  only  in  outline,  enough  can  be  set  forth  to  justify  the  rec- 
ommendations. The  Committee  has  necessarily  been  selective.  A  year 
was  not  enough  time  to  investigate  everything  relevant  to  intelligence 
activities. 

These  considerations  guided  the  Committee's  choices: 

(1)  A  limited  number  of  programs  and  incidents  were  ex- 
amined in  depth  rather  than  reviewing  hundreds  superficially. 
The  Committee's  purpose  was  to  understand  the  causes  for 
the  particular  performance  or  behavior  of  an  agency. 

(2)  The  specific  cases  examined  were  chosen  because  they 
reflected  generic  problems. 


50  U.S.C.  403(d)(5). 


6 

(3)  Where  broad  programs  were  closely  reviewed  (for 
example,  the  CIA's  covert  action  programs) ,  the  Committee 
sought  to  examine  successes  as  well  as  apparent  failures. 

(4)  Programs  were  examined  from  Franklin  Roosevelt's 
administration  to  the  present.  This  was  done  in  order  to 
present  the  historical  context  within  which  intelligence  ac- 
tivities have  developed  and  to  assure  that  sensitive,  funda- 
mental issues  would  not  be  subject  to  possible  partisan  biases. 

It  is  clear  from  the  Committee's  inquiry  that  problems  arising  from 
the  use  of  the  national  intelligence  system  at  home  and  abroad  are  to 
be  found  in  every  administration.  Accordingly,  the  Committee  chose 
to  emphasize  particular  parts  of  the  national  intelligence  system  and 
to  address  particular  cases  in  depth.  The  Committee  has  concentrated 
its  energies  on  the  six  executive  branch  groups  that  make  up  what 
is  called  "National  Intelligence". 

(1)  The  Central  Intelligence  Agency. 

(2)  The  counterintelligence  activities  of  the  Federal  Bu- 
reau of  Investigation. 

(3)  The  National  Security  Agency. 

(4)  The  national  intelligence  components  of  the  Depart- 
ment of  Defense  other  than  NSA. 

(5)  The  National  Security  Council. 

(6)  The  intelligence  activities  of  the  Department  of  State. 

The  investigation  of  these  national  intelligence  groupings  included 
examining  the  degree  of  command  and  control  exercised  over  them 
by  the  President  and  other  key  Government  officials  or  institutions. 
The  Committee  also  sought  to  evaluate  the  ability  and  effectiveness  of 
Congress  to  assert  its  oversight  right  and  responsibilities.  The  agencies 
the  Committee  has  concentrated  on  have  great  powers  and  extensive 
activities  which  must  be  understood  in  order  to  judge  fairly  whether 
the  United  States  intelligence  system  needs  reform  and  change.  The 
Committee  believes  that  many  of  its  general  recommendations  can 
and  should  be  applied  to  the  intelligence  operations  of  all  other 
government  agencies. 

Based  on  its  investigation,  the  Committee  concludes  that  solutions 
to  the  main  problems  can  be  developed  by  analyzing  the  broad  patterns 
emerging  from  the  examination  of  particular  cases.  At  the  same  time, 
neither  the  dangers,  nor  the  causes  of  abuses  within  the  intelligence 
system,  nor  their  possible  solutions  can  be  fairly  understood  without 
evaluating  the  historical  context  in  which  intelligence  operations  have 
been  conducted. 

Individual  cases  and  programs  of  government  surveillance  which  the 
Committee  examined  raise  questions  concerning  the  inherent  conflict 
between  the  government's  perceived  need  to  conduct  surveillance  and 
the  citizens'  constitutionally  protected  rights  of  privacy  and  dissent.  It 
has  become  clear  that  if  some  lose  their  liberties  unjustly,  all  may  lose 
their  liberties.  The  protections  and  obligations  of  law  must  apply  to  all. 
Only  by  looking  at  the  broad  scope  of  questionable  activity  over  a 
long  period  can  we  realistically  assess  the  potential  dangers  of  intru- 
sive government.  For  example,  only  through  an  understanding  of  the 


totality  of  government  ejfforts  against  dissenters  over  the  past  thirty 
years  can  one  weigh  the  extent  to  which  such  an  emphasis  may  "chill" 
legitimate  free  expression  and  assembly. 

The  Select  Committee  has  conducted  the  only  thorough  investigation 
ever  made  of  United  States  intelligence  and  its  post  World  War  II 
emergence  as  a  complex,  sophisticated  system  of  multiple  agencies 
and  extensive  activities.  The  Committee  staff  of  100,  including  60  pro- 
fessionals, has  assisted  the  11  members  of  the  Committee  in  this  in- 
depth  inquiry  which  involved  more  than  800  interviews,  over  250 
executive  hearings,  and  documentation  in  excess  of  110,000  pages. 

The  advice  of  former  and  current  intelligence  officials,  Cabinet  mem- 
bers, State,  Defense,  and  Justice  Department  experts,  and  citizens 
from  the  private  sector  who  have  served  in  national  security  areas 
has  been  sought  throughout  the  Committee's  inquiry.  The  Committee 
has  made  a  conscious  effort  to  seek  the  views  of  all  principal  officials 
who  have  served  in  the  intelligence  agencies  since  the  end  of  World 
War  II.  We  also  solicited  the  opinions  of  constitutional  experts  and 
the  wisdom  of  scientists  knowledgeable  about  the  technology  used  by 
intelligence  agencies.  It  was  essential  to  learn  the  views  of  these  sources 
outside  of  the  government  to  obtain  as  full  and  balanced  an  under- 
standing of  intelligence  activities  as  possible. 

The  fact  that  government  intelligence  agencies  resist  any  examina- 
tion of  their  secret  activities  even  by  another  part  of  the  same  govern- 
ment should  not  be  minimized.  The  intelligence  agencies  are  a  sector 
of  American  government  set  apart.  Employees'  loyalties  to  their  or- 
ganizations have  been  conditioned  by  the  closed,  compaitmented  and 
secretive  circumstances  of  their  agencies'  formation  and  operation.  In 
some  respects,  the  intelligence  profession  resembles  monastic  life  with 
some  of  the  disciplines  and  pereonal  sacrifices  reminiscent  of  medieval 
orders.  Intelligence  work  is  a  life  of  service,  but  one  in  which  the 
norms  of  American  national  life  are  sometimes  distressingly  distorted. 

Despite  its  legal  Senate  mandate,  and  the  issuance  of  subpoenas,  in 
no  instance  has  the  Committee  been  able  to  examine  the  agencies'  files 
on  its  own.  In  all  the  agencies,  whether  CIA,  FBI,  NSA,  INK,  DIA, 
or  the  NSC,  documents  and  evidence  have  been  presented  through 
the  filter  of  the  agency  itself. 

Although  the  Senate  inquiry  was  congressionally  ordered  and 
although  properly  constituted  committees  under  the  Constitution  have 
the  right  of  full  inquiry,  the  Central  Intelligence  Agency  and  other 
agencies  of  the  executive  branch  have  limited  the  Committee's  access  to 
the  full  record.  Several  reasons  have  been  given  for  this  limitation.  In 
some  instances,  the  so-called  doctrine  of  executive  privilege  has  been 
asserted.  Despite  these  assertions  of  executive  privilege,  there  are  no 
classes  of  documents  which  the  Committee  has  not  obtained,  whether 
from  the  NSC,  the  personal  papers  of  former  Presidents  and  their 
advisors,  or,  as  in  the  case  of  the  Committee's  Report  on  Alleged  Assas- 
sination Plots  Involving  Foreign  Leaders,  all  classes  of  documents 
available  in  the  executive  branch.  The  exception,  of  course,  involves 
the  Nixon  files  which  were  not  made  available  because  of  court  order. 

It  should  be  noted  that  in  some  highly  important  areas  of  its  in- 


8 

vestigation,  the  Committee  has  been  refused  access  to  files  or  docu- 
ments. These  involve,  among  others,  the  arrangements  and  agreements 
made  between  the  intelligence  agencies  and  their  informers  and 
sources,  including  other  intelligence  agencies  and  governments.  The 
Committee  has  agreed  that  in  general,  the  names  of  agents,  and  their 
methods  of  conducting  certain  intelligence  activities  should  remain 
in  the  custody  of  a  few  within  the  executive  branch.  But  there 
is  a  danger  and  an  uncertainty  which  arises  from  accepting  at  face 
value  the  assertions  of  the  agencies  and  departments  which  in  the  past 
have  abused  or  exceeded  their  authority.  If  the  occasion  demands,  a 
duly  authorized  congressional  committee  must  have  the  right  to  go 
behind  agency  assertions,  and  review  the  full  evidence  on  which  agency 
responses  to  committee  inquiries  have  been  based.  There  must  be  a 
check:  some  means  to  ascertain  whether  the  secrets  being  kept  are, 
in  fact,  valid  national  secrets.  The  Committee  believes  that  the  burden 
of  proof  should  be  on  those  who  ask  that  a  secret  program  or  policy 
be  kept  secret. 

The  Committee's  report  consists  of  a  number  of  case  studies  which 
have  been  pursued  to  the  best  of  the  Committee's  ability  and  which  the 
Committee  believes  illuminate  the  purposes,  character,  and  usefulness 
of  the  shielded  world  of  intelligence  activities.  The  inquiry  conducted 
over  the  past  15  months  will  probably  provide  the  only  broad  insight 
for  some  time  into  the  now  permanent  role  of  the  intelligence  commu- 
nity in  our  national  government.  Because  of  this,  and  because  of  the 
need  to  assure  that  necessary  secret  activities  remain  under  constitu- 
tional control,  the  recommendations  set  forth  by  the  Committee  are 
submitted  with  a  sense  of  urgency  and  with  the  admonition  that  to 
ignore  the  dangers  posed  by  secret  government  action  is  to  invite  the 
further  weakening  of  our  democracy. 

D.  The  Historical  Context  of  the  Inquiry 

The  thirty  years  since  the  end  of  World  War  II  have  been  marked 
by  continuing  experimentation  and  change  in  the  scope  and  methods 
of  the  United  States  Government's  activities  abroad.  From  the  all-out 
World  War  between  the  Axis  powers  and  the  allies,  to  the  Cold  War 
and  fears  of  nuclear  holocaust  between  the  communist  bloc  and  West- 
ern democratic  powers,  to  the  period  of  "wars  of  liberation"  in  the 
former  colonial  areas,  the  world  has  progressed  to  an  era  of  negotia- 
tions leading  to  some  easing  of  tensions  between  the  United  States 
and  the  Soviet  Union.  In  addition,  the  People's  Republic  of  China 
has  emerged  as  a  world  power  which  the  United  States  and  other 
nations  must  consider.  The  recognizable  distinctions  between  declared 
war  and  credible  peace  have  been  blurred  throughout  these  years 
by  a  series  of  regional  wars  and  uprisings  in  Asia,  the  Middle  East, 
Latin  America,  Europe,  and  Africa.  The  competing  great  powers 
have  participated  directly  or  indirectly  in  almost  all  of  these  wars. 


Of  necessity,  this  country's  intelligence  agencies  have  played  an 
important  role  in  the  diplomacy  and  military  activities  of  the  Jnited 
States  during  the  last  three  decades.  Intelligence  infomiation  has 
helped  shape  policy,  and  intelligence  resources  nave  been  used  to  carry 
out  those  policies. 

The  fear  of  war,  and  its  attendant  uncertainties  and  doubts,  has 
fostered  a  series  of  secret  practices  that  have  eroded  the  processes  of 
open  democratic  government.  Secrecy,  even  what  would  be  agreed  by 
reasonable  men  to  be  necessary  secrecy,  has,  by  a  subtle  and  barely 
perceptible  accretive  process,  placed  constraints  upon  the  liberties  of 
the  American  people. 

Shortly  after  World  War  II,  the  United  States,  based  on  its  war- 
time experience,  created  an  intelligence  system  with  the  assigned  mis- 
sion at  home  and  abroad  of  protecting  to  protect  the  national  security, 
primarily  through  the  gathering  and  evaluation  of  intelligence  about 
individuals,  groups,  or  governments  perceived  to  threaten  or  poten- 
tially threaten  the  United  States.  In  general,  these  intelligence  func- 
tions were  performed  with  distinction.  However,  both  at  home  and 
abroad,  the  new  intelligence  system  involved  more  than  merely  ac- 
quiring intelligence  and  evaluating  information ;  the  system  also  un- 
dertook activities  to  counter,  combat,  disrupt,  and  sometimes  destroy 
those  who  were  perceived  as  enemies.  The  belief  that  there  was  a  need 
for  such  measures  was  widely  held,  as  illustrated  in  the  following  re- 
port related  to  the  1954  Hoover  Commission  Report  on  government 
organization : 

It  is  now  clear  that  we  are  facing  an  implacable  enemy  whose 
avowed  objective  is  world  domination  by  whatever  means 
and  at  whatever  cost.  There  are  no  rules  in  such  a  game. 
Hitherto  acceptable  norms  of  human  conduct  do  not  apply. 
If  the  U.S.  is  to  survive,  long-standing  American  concepts 
of  "fair  play"  must  be  reconsidered.  We  must  develop  ef- 
fective espionage  and  counterespionage  services.  We  must 
learn  to  subvert,  sabotage  and  destroy  our  enemies  by  more 
clever,  more  sophisticated  and  more  effective  methods  than 
those  used  against  us.  It  may  become  necessary  that  the 
American  people  w^ill  be  made  acquainted  with,  understand 
and  support  this  fundamentally  repugnant  philosophy. 

The  gray,  shadowy  world  between  war  and  peace  became  the  natural 
haunt  for  covert  action,  espionage,  propaganda,  and  other  clandestine 
intelligence  activities.  Former  Secretary  of  State  Dean  Rusk  described 
it  as  the  environment  for  the  nasty  wars  "in  the  back  alleys  of  the 
world." 

Although  there  had  been  many  occasions  requiring  intelligence- 
gathering  and  secret  government  action  against  foreign  and  domestic 
national  security  threats  prior  to  World  War  II,  the  intelligence  com- 
munity developed  during  and  after  that  war  is  vastly  different  in 
degree  and  kind  from  anything  that  had  existed  previously.  The  sig- 


69-983  O  -  76  -  2 


10 

nificant  new  facets  of  the  post-war  system  are  the  great  size,  techno- 
logical capacity  and  bureaucratic  momentum  of  the  intelligence  ap- 
paratus, and,  more  importantly,  the  public's  acceptance  of  the  necessity 
for  a  substantial  permanent  intelligence  system.  This  capability  con- 
trasts with  the  previous  sporadic,  ad  hoc  efforts  which  generally 
occurred  during  wars  and  national  emergencies.  The  extent  and  mag- 
nitude of  secret  intelligence  activities  is  alien  to  the  previous  American 
experience. 

Three  other  developments  since  Woi'ld  War  II  haA^e  contributed  to 
the  power,  influence  and  importance  of  the  intelligence  agencies. 

First,  the  executive  branch  generally  and  the  President  in  partic- 
ular have  become  paramount  within  the  federal  system,  primarily 
through  the  retention  of  powers  accrued  during  the  emergency  of 
World  War  II.  The  intelligence  agencies  are  generally  responsible 
directly  to  the  President  and  because  of  their  capabilities  and  because 
they  have  usually  operated  out  of  the  spotlight,  and  often  in  secret, 
thev  have  also  contributed  to  the  /growth  of  executive  power. 

Second,  the  direct  and  indirect  impact  of  federal  programs  on  the 
lives  of  individual  citizens  has  increased  tremendously  since  World 
War  II. 

Third,  in  the  thirty  years  since  World  War  II,  technology  has  made 
unparalleled  advances.  New  technological  innovations  have  markedly 
increased  the  agencies'  intelligence  collection  capabilities,  a  circum- 
stance which  has  greatly  enlarged  the  potential  for  abuses  of  personal 
liberties.  To  illustrate,  the  SALT  negotiations  and  treaties  have  been 
possible  because  technological  advances  make  it  possible  to  accuratelv 
monitor  arms  limitations,  but  the  very  technology  which  permits  such 
precise  weapons  monitoring  also  enables  the  user  to  intrude  on  the 
private  conversations  and  activities  of  citizens. 

The  targets  of  our  intelligence  efforts  after  World  War  II — the 
activities  of  hostile  intelligence  services,  communists,  and  groups  asso- 
ciated with  them  both  at  home  and  abroad — were  determined  by 
successive  acbninistrations.  In  the  1960's,  as  the  civil  rights  movement 
grew  in  the  countrv,  some  intelligence  agencies  directed  attention  to 
civil  rights  organizations  and  groups  hostile  to  them,  such  as  the 
Ku  Klux  Klan.  From  the  mid-1960's  until  the  end  of  the  Vietnam  war, 
intelligence  efforts  were  focused  on  antiwar  groups. 

Just  as  the  nature  of  intelliflrence  activitv  has  chansred  as  a  result  of 
international  and  national  developments,  the  public's  attitude  toward 
intellifirence  has  also  altered.  During  the  last  eight  years,  beginning 
with  Ramparts  magazine's  exposure  of  CIA  covert  relationships  with 
non-governmental  organizations,  there  has  been  a  series  of  allegations 
in  the  press  and  Conoq-ess  which  have  provoked  serious  questions  about 
the  conduct  of  intelligence  a<rencies  at  home  and  abroad.  The  Water- 
gate disclosures  raised  additional  questioTis  concerninq:  abuse  of  power 
by  the  executive  branch,  misuse  of  intelligence  agencies,  and  the  need 
to  strenjirthen  le.ofal  restraints  aoainst  such  abuses. 

While  the  evidence  in  th^  Committee's  Report  emphasizes  the  mis- 
guided or  improper  activities  of  a  few  individuals  in  the  executive 
branch,  it  is  clear  that  the  growth  of  intelligence  abuses  reflects  a  more 
general  failure  of  our  basic  institutions. 


See  the  Select  Committee's  detailed  report  on  "Intelligence  and  Technology." 


11 

Throughout  its  investigation,  the  Committee  has  carefully  inquired 
into  the  role  of  presidents  and  their  advisors  with  respect  to  particular 
intelligence  programs.  On  occasion,  intelligence  agencies  concealed 
their  programs  from  those  in  higher  authority,  more  frequently  it  was 
the  senior  officials  themselves  who,  through  pressure  for  results,  created 
the  climate  within  which  the  abuses  occurred.  It  is  clear  that  greater 
executive  control  and  accountability  is  necessary. 

The  legislative  branch  has  been  remiss  in  exercising  its  control  over 
the  intelligence  agencies.  For  twenty-five  years  Congress  has  appropri- 
ated funds  for  intelligence  activities.  The  closeted  and  fragmentary 
accounting  which  the  intelligence  community  has  given  to  a  desig- 
nated small  group  of  legislators  was  accepted  by  the  Congress  as  ade- 
quate and  in  the  best  interest  of  national  security.  There  were  occa- 
sions when  the  executive  intentionally  withheld  information  relating 
to  intelligence  programs  from  the  Congress,  but  there  were  also  occa- 
sions when  the  principal  role  of  the  Congress  was  to  call  for  more  intel- 
ligence activity,  including  activity  which  infringed  the  rights  of  citi- 
zens. In  general,  as  with  the  executive,  it  is  clear  that  Congress  did  not 
carry  out  effective  oversight. 

The  courts  have  also  not  confronted  intelligence  issues.  As  the  Su- 
preme Court  noted  in  1972  in  commenting  on  warrantless  electronic 
surveillance,  the  practice  had  been  permitted  by  successive  presidents 
for  more  than  a  quarter  of  a  century  without  "guidance  from  the  Con- 
gress or  a  definitive  decision  of  the  Courts".  Of  course,  courts  only  con- 
sider the  issues  brought  before  them  by  litigants,  and  pervasive  se- 
crecy— coupled  with  tight  judicially  imposed  rules  of  standing— have 
contributed  to  the  absence  of  judicial  decisions  on  intelligence  issues. 
Nevertheless,  the  Committee's  investigation  has  uncovered  a  host  of 
serious  legal  and  constitutional  issues  relating  to  intelligence  activity 
and  it  is  strong  proof  of  the  need  for  reform  to  note  that  scarcely  any 
of  those  issues  have  been  addressed  in  the  courts. 

Throughout  the  period,  the  general  public,  while  generally  excluded 
from  debate  on  intelligence  issues,  nevertheless  supported  the  known 
and  perceived  activities  of  the  intelligence  agencies.  In  the  few  years 
prior  to  the  establishment  of  this  Committee,  however,  the  public's 
awareness  of  the  need  to  examine  intelligence  issues  was  heightened. 
The  series  of  allegations  and  partial  exposures  in  the  press  and  the 
Congress  provoked  serious  questions  about  the  conduct  of  intelligence 
activities  at  home  and  abroad.  The  Watergate  affair  increased  the  pub- 
lic's concern  about  abuse  of  governmental  power  and  caused  greater 
attention  to  be  paid  to  the  need  to  follow  and  to  strengthen  the  role  of 
law  to  check  such  abuses. 

Against  this  background,  the  Committee  considered  its  main  task 
as  making  informed  recommendations  and  judgments  on  the  extent 
to  which  intelligence  activities  are  necessary  and  how  such  necessary 
activities  can  be  conducted  within  the  framework  of  the  Constitution. 

E.  The  Dilemma  or  Secrecy  and  Open  Constitutional 
Government 

Since  World  War  II,  with  steadily  escalatina:  consequences,  many 
decisions  of  national  importance  have  been  made  in  secrecy,  often  by 
the  executive  branch  alone.  These  decisions  are  frequently  based  on 


12 

information  obtained  by  clandestine  means  and  available  only  to  the 
executive  branch.  Until  very  recently,  the  Congress  has  not  shared 
in  this  process.  The  cautions  expressed  by  the  Founding  Fathers  and 
the  constitutional  checks  designed  to  assure  that  policymaking  not  be- 
come the  province  of  one  man  or  a  few  men  have  been  avoided  on  nota- 
ble recent  occasions  through  the  use  of  secrecy.  John  Adams  expressed 
his  concern  about  the  dangers  of  arbitrary  power  200  years  ago : 

Whenever  we  leave  principles  and  clear  positive  laws  we  are 
soon  lost  in  the  wild  regions  of  imagination  and  possibility 
where  arbitrary  power  sits  upon  her  brazen  throne  and  gov- 
erns with  an  iron  scepter. 

Recent  Presidents  have  justified  this  secrecy  on  the  basis  of  "national 
security,"  "the  requirements  of  national  defense,"  or  "the  confidential- 
ity required  by  sensitive,  ongoing  negotiations  or  operations."  These 
justifications  were  generally  accepted  at  face  value.  The  Bay  of  Pigs 
fiasco,  the  secret  war  in  Laos,  the  secret  bombing  of  Cambodia,  the 
anti-Allende  activities  in  Chile,  the  Waterp-ate  affair,  were  all  instances 
of  the  use  of  power  cloaked  in  secrecy  which,  when  revealed,  provoked 
widespread  popular  disapproval.  This  series  of  events  has  ended,  for 
the  time  being  at  least,  passive  and  uncritical  acceptance  by  the  Con- 
gress of  executive  decisions  in  the  areas  of  foreign  policy,  national 
security  and  intelligence  activities.  If  Congress  had  met  its  oversight 
responsibilities  some  of  these  activities  might  have  been  averted. 

An  examination  of  the  scope  of  secret  intelligence  activities  under- 
taken in  the  past  three  decades  reveals  that  they  ranged  from  war  to 
conventional  espionage.  It  annearsthat  some  United  States  intelligence 
activities  may  have  violated  treaty  and  covenant  obligations,  but  more 
importantly,  the  rights  of  Uni<"ed  States  citizens  have  been  infringed 
upon.  Despite  citizen  and  congressional  concern  about  these  programs, 
no  processes  or  procedures  have  been  developed  bv  either  the  Congress 
or  the  executive  branch  which  would  assure  Congress  of  access  to  secret 
information  which  it  must  have  to  carry  out  its  constitutional  respon- 
sibilities in  authorizing  and  flfivinflf  its  advice  and  consent.  The  hind- 
sight o^  historv  suffo-ests  that  many  secret  operations  were  ill-advised 
or  might  have  been  more  beneficial  to  United  States  interests  had  they 
been  conducted  onenly,  rather  than  serretly. 

What  is  a  valid  national  secret?  What  can  properly  be  concealed 
from  the  scrutiny  of  the  American  people,  from  various  segments  of 
the  exeputive  branch  or  from  a  duly  constituted  oversight  body  of 
their  elected  representatives?  Assassination  plots?  The  overthrow  of 
an  elected  democratic  government?  Drua:  testin,q-  on  unwitting  Ameri- 
can citizens?  Obtaining  millions  of  private  cables?  Massive  domestic 
spving  bv  the  CIA  and  the  military?  The  ille.qral  opening  of  mail? 
Attempts  by  an  agency  of  the  government  to  blackmail  a  civil  rights 
leader?  These  have  occurred  and  each  has  been  withheld  from  scrutiny 
by  the  public  and  the  Congress  by  the  label  "secret  intelligence." 

In  the  Committee's  view,  these  illegal,  improper  or  unwise  acts  are 
not  valid  national  secrets  and  most  certainly  should  not  be  kept  from 
the  scrutiny  of  a  duly-constituted  congressional  oversight  body. 

The  definition  of  a  valid  national  secret  is  far  more  difficult  to  set 
forth.  It  varies  from  time  to  time.  There  is  presently  general  agree- 


13 

ment  that  details  about  military  activities,  technology,  sources  of 
information  and  particular  intelligence  methods  are  secrets  that  should 
be  carefully  protected.  It  is  most  important  that  a  process  be  devised 
for  agreeing  on  what  national  secrets  are,  so  that  the  reasons  for  nec- 
essary secrecy  are  understood  by  all  three  branches  of  government  and 
the  public,  that  they  be  under  constant  review,  and  that  any  changes 
requiring  the  protection  of  new  types  of  information  can  be  addressed, 
understood  and  agreed  on  within  a  framework  of  constitutional  con- 
sensus. 

The  Committee  stresses  that  these  questions  remain  to  be  decided  by 
the  Congress  and  the  executive  jointly : 

— What  should  be  regarded  as  a  national  secret  ? 
— Who  determines  what  is  to  be  kept  secret  ? 
• — How  can  decisions  made  in  secret  or  programs  secretly 
approved  be  reviewed? 

Two  great  problems  have  confronted  the  Committee  in  carrying 
out  its  charge  to  address  these  issues : 

The  first  is  how  our  open  democratic  society,  which  has  endured 
and  flourished  for  200  years,  can  be  adapted  to  overcome  the  threats 
to  liberty  posed  by  the  continuation  of  secret  government  activities. 
The  leaders  of  the  United  States  must  devise  ways  to  meet  their  respec- 
tive intelligence  responsibilities,  including  informed  and  effective  con- 
gressional oversight,  in  a  manner  which  brings  secrecy  and  the  power 
that  secrecy  affords  within  constitutional  bounds. 

For  the  executive  branch,  the  specific  problem  concerns  instituting 
effective  control  and  accountability  systems  and  improving  efficiency. 
Many  aspects  of  these  two  problem  areas  which  have  been  examined 
during  the  Committee's  inquiry  of  intelligence  agencies  are  addressed 
in  the  recommendations  in  Chapter  XVIII.  It  is  our  hope  that  intelli- 
gence oversight  committees  working  with  the  executive  branch  will 
develop  legislation  to  remedy  the  problems  exposed  by  our  inquiry  and 
described  in  this  report.  The  Committee  has  already  recommended 
the  creation  of  an  oversight  committee  with  the  necessary  powers  to 
exercise  legislative  authority  over  the  intelligence  activities  of  the 
United  States. 

It  is  clear  that  the  Congress  must  exert  its  will  and  devise  procedures 
that  will  enable  it  to  play  its  full  constitutional  role  in  making 
policy  decisions  concerning  intelligence  activities.  Failure  to  do  so 
would  permit  further  erosion  of  constitutional  government. 

This  Committee  has  endeavored  to  include  in  its  final  public  report 
enough  information  to  validate  its  findings  and  recommendations. 
Most  of  the  inquiry  and  the  documentation  obtained  by  the  Committee, 
particularly  that  concerning  foreign  and  military  intelligence,  is  of 
a  highly  classified  nature.  Determining  what  could  and  should  be  re- 
vealed has  been  a  major  concern. 

In  a  meeting  with  President  Ford  at  the  outset  of  our  inquiry  in 
February  1975,  the  Committee  agreed  not  to  disclose  any  classified  in- 
formation provided  by  the  executive  branch  without  first  consult- 
ing the  appropriate  agencies,  offices  and  departments.  In  the  case  of 
objections,  the  Committee  agreed  to  carefully  consider  the  Executive's 
reasons  for  maintaining  secrecy,  but  the  Committee  determined  that 
final  decisions  on  any  disclosure  would  be  up  to  the  Committee. 


14 

The  Select  Committee  has  scrupulously  adhered  to  this  agreement. 
The  Interim  Report  on  Alleged  Assassination  Plots  Involving  Foreign 
Leaders,  the  report  on  CIA  activities  in  Chile,  the  report  on  illegal 
NSA  surveillances,  and  the  disclosures  of  illegal  activities  on  the  part 
of  FBI  COINTELPRO,  the  FBI's  harassment  of  Dr.  Martin  Luther 
King,  Jr.,  and  other  matters  revealed  in  the  Committee's  public  hear- 
ings, were  all  carefully  considered  by  the  Committee  and  the  executive 
branch  working  together  to  determine  what  information  could  be  de- 
classified and  revealed  without  damaging  national  security.  In  those 
reports  and  hearings,  virtually  all  differences  between  the  Committee 
and  the  Executive  were  resolved.  The  only  significant  exception  con- 
cerned the  release  to  the  public  of  the  Assassination  Report,  which  the 
executive  branch  believed  would  harm  national  security.  The  Com- 
mittee decided  otherwise. 

Some  criteria  for  defining  a  valid  national  secret  have  been  agreed 
to  over  the  past  year.  Both  the  Committee  and  the  executive  branch 
now  agree  that  generally  the  names  of  intelligence  sources  and  the 
details  of  sensitive  methods  used  by  the  intelligence  services  should 
remain  secret.  Wherever  possible,  the  right  of  privacy  of  individuals 
and  groups  should  also  be  preserved.  It  was  agreed,  however,  that  the 
details  of  illegal  acts  should  be  disclosed  and  that  the  broad  scope  of 
United  States  intelligence  activities  should  be  sufficiently  described 
to  give  public  reassurance  that  the  intelligence  agencies  are  operating 
consistent  w^ith  the  law  and  declared  national  policy. 

The  declassification  working  procedures  developed  between  this 
Committee,  the  CIA  and  other  parts  of  the  intelligence  community 
constitute  the  beginnings  of  agreed,  sound  and  sensible  methods  and 
criteria  for  making  public  matters  that  should  be  made  public.  This 
disclosure  process  is  an  important  step  toward  achieving  the  national 
consensus  required  if  our  intelligence  system  is  to  enjoy  essential  public 
support. 

There  is  a  clear  necessity,  after  thirty  years  of  substantial  secret  ac- 
tivities, for  public  debate  and  legislative  decisions  about  the  future 
course  of  our  intelligence  system.  This  report  is  intended  to  assist  the 
Senate,  the  Congress,  and  the  country  in  making  the  vital  decisions 
that  are  required  to  be  made  in  the  coming  years. 

This  section  of  the  Final  Report  focuses  on  the  departments  and 
agencies  engaged  in  foreign  and  military  intelligence.  The  Commit- 
tee's findings,  conclusions,  and  recommendations  in  these  areas  can 
be  found  in  Chapter  XVIII. 


II.  THE  FOREIGN  AND  MILITARY  INTELLIGENCE 
OPERATIONS  OF  THE  UNITED  STATES :  AN  OVERVIEW 

Permanent  institutions  for  the  conduct  of  secret  foreign  and  mili- 
tary intelligence  activities  are  a  relatively  new  feature  of  American 
government.  Secure  behind  two  oceans  and  preoccupied  with  the  set- 
tlement of  a  continent,  America  had  no  pennanent  foreign  intelligence 
establishment  for  more  than  a  century  and  a  half.  In  times  of  crisis, 
Americans  improvised  their  intelligence  operations.  In  times  of  peace, 
such  operations  were  not  needed  and  were  allowed  to  lie  fallow. 

Despite  the  experience  of  the  First  World  War,  Americans  believed 
they  could  continue  this  pattern  well  into  the  Twentieth  Century.  The 
military  services  developed  important  technical  intelligence  capabil- 
ities, such  as  the  breaking  of  the  Japanese  code,  but  the  American 
public  remained  unaware  of  the  importance  of  effective  intelligence  for 
its  security.  As  a  world  power,  the  United  States  came  late  to  intelli- 
gence. It  came  on  December  7,  1941,  when  Japan  attacked  Pearl 
Harbor. 

That  searing  intelligence  failure  led  to  the  Congress'  first  effort  to 
deal  with  the  necessity  and  complexity  of  modem  intelligence.  The 
Joint  Committee  on  the  Pearl  Harbor  Attack,  after  a  sweeping  in- 
vestigation, recommended  in  1946  a  unified  and  permanent  intelli- 
gence effort  by  the  United  States — concepts  ultimately  embodied  in 
the  basic  charter  for  American  intelligence.  The  National  Security 
Act  adopted  by  the  Congress  in  1947.  However,  neither  the  Pearl 
Harbor  Committee,  nor  the  National  Security  Act  addressed  some 
of  the  fundamental  problems  secret  intelligence  operations  pose  for 
our  democratic  and  constitutional  form  of  government  and  America's 
unique  system  of  checks  and  balances. 

The  Senate  Select  Committee  on  Intelligence  Activities  represents 
the  second  major  effort  by  the  Congress  to  come  to  grips  with  intelli- 
gence problems,  in  particular  the  basic  constitutional  and  structural 
issues  arising  from  a  permanent  secret  intelligence  establishment. 
While  these  problems  were  the  subject  of  the  investigation  and  are 
the  focus  of  this  report,  the  Select  Committee  wishes  to  emphasize  that 
it  found  much  that  was  good  and  proper  in  America's  intelligence 
efforts.  In  particular,  the  capacity  and  dedication  of  the  men  and 
women  serving  in  our  intelligence  services  is  to  be  commended. 

This  inquiry  was  not  brought  forth  by  an  individual  event  such  as 
a  massive  intelliafence  failure  threatening  the  nation's  security.  Rather 
it  is  the  result  of  a  series  of  occurrences  adversely  affecting  the  liberties 
of  individual  Americans  and  undermining  the  lonsr-term  interests  and 
reputation  of  the  I"''nited  States.  In  effect,  the  Select  Committee  was 
created  to  deal  with  the  question  of  whether  our  democratic  system  has 
effectively  governed  in  the  crucial  area  of  secret  intelligence. 

(15) 


16 

Mr.  Clark  Clifford,  one  of  the  authors  of  the  National  Security 
Act  of  1947,  told  the  Committee  that : 

The  law  that  was  drawn  in  1947  was  of  a  general  nature 
and  properly  so,  because  it  was  the  first  law  of  its  kind.  We 
were  blazing  a  new"  trail.  ^ 

It  has  been  the  responsibility  of  the  Select  Committee  to  consider 
where  this  eecret  trail  has  taken  the  nation,  and  with  this  as  prologue, 
to  begin  the  task  of  charting  the  future. 

A.  The  Basic  Issues:  Secrecy  and  Democracy 

The  task  of  democratic  government  is  to  reconcile  conflicting  values. 
The  fundamental  question  faced  by  the  Select  Committee  is  how  to 
reconcile  the  clash  between  secrecy  and  democratic  government  itself. 
Secrecy  is  an  essential  part  of  most  intelligence  activities.  However, 
secrecy  undermines  the  United  States  Government's  capacity  to  deal 
effectively  with  the  principal  issues  of  American  intelligence  addressed 
by  the  Select  Committee : 

— The  lack  of  clear  legislation  defining  the  authority  for  permis- 
sible intelligence  acti\'ities  has  been  justified  in  part  for  reasons  of 
secrecy.  Absent  clear  legal  boundaries  for  intelligence  activities,  the 
Constitution  has  been  violated  in  secret  and  the  power  of  the  executive 
branch  has  gone  unchecked,  unbalanced. 

— Secrecy  has  shielded  intelligence  activities  from  full  account- 
ability and  effective  supervision  both  within  the  executive  branch 
and  bv  the  Congress. 

— Reliance  on  covert  action  has  been  excessive  because  it  offers  a 
secret  shortcut  around  the  democratic  process.  This  shortcut  has  led 
to  questionable  foreign  involvements  and  unacceptable  acts. 

— ^The  important  line  between  public  and  private  action  has  become 
blurred  as  the  result  of  the  secret  use  of  private  institutions  and  in- 
dividuals by  intelligence  agencies.  This  clandestine  relationship  has 
called  into  question  their  integrity  and  undermined  the  crucial 
independent  role  of  the  private  sector  in  the  American  system  of 
democracv. 

— Duplication,  waste,  inertia  and  ineffectiveness  in  the  intelligence 
community  has  been  one  of  the  costs  of  insulating  the  intelligence 
bureaucracy  from  the  rigors  of  Congressional  and  public  scrutiny. 

— Finally,  secrecy  has  been  a  tragic  conceit.  Inevitably,  the  truth 
prevails,  and  policies  pursued  on  the  premise  that  they  could  be  plaus- 
ibly denied,  in  the  end  damage  America's  reputation  and  the  faith 
of  her  people  in  their  government. 

For  three  decades,  these  problems  have  grown  more  intense.  The 
United  States  Government  responded  to  the  challenge  of  secret  intel- 
ligence operations  by  resorting  to  procedures  that  were  informal, 
implicit,  tacit.  Such  an  approach  could  fit  within  the  tolerances  of 
our  democratic  system  so  long  as  such  activities  were  small  or  tem- 
porary. Now,  however,  the  permanence  and  scale  of  America's  intelli- 
gence effort  and  the  persistence  of  its  problems  require  a  different 
solution. 


^  Clark  Clifford  testimony,  12/5/75,  Hearings,  vol.  7,  p.  50. 


17 

B.  The  Scope  of  the  Select  Committee's  Inquiry  into  Foreign  and 
MiiiiTAKY  Intelligence  Operations 

The  operations  of  the  United  States  Government  in  the  field  of 
intelligence  involve  the  activities  of  hundreds  of  thousands  of  individ- 
uals and  the  expenditure  of  billions  of  dollars.  They  are  carried  out 
by  a  complex  "community"  of  organizations  whose  functions  interact 
and  overlap.  Because  of  their  scope,  the  Select  Committee  could  not 
deal  in  depth  with  all  aspects  of  America's  intelligence  activities. 
Instead  the  Committee  focused  on  the  principal  organizations,  their 
key  functions  and  the  major  issues  confronting  the  United  States  in 
the  field  of  foreign  and  military  intelligence.  In  doing  so,  the  Com- 
mittee sought  to  uncover  the  truth  of  alleged  abuses  by  the  intelligence 
agencies  and  to  ascertain  the  legitimate  needs  and  requirements 
of  an  effective  future  intelligence  system  for  the  United  States  that 
can  function  within  the  boundaries  established  by  the  Constitution 
and  our  democratic  form  of  government. 

The  Select  Committee  focused  on  five  institutions : 

— The  National  Security  Council  (NSC),  which  on  behalf  of  the 
President,  is  supposed  to  direct  the  entire  national  security  apparatus 
of  the  United  States  Government,  including  the  intelligence  commu- 
nity. As  the  senior  policymaking  body  in  the  executive  branch  in  the 
field  of  national  security,  the  NSC  is  also  the  ultimate  consumer  of  the 
nation's  intelligence  product. 

— The  Director  of  Central  Intelligence  (DCI) ,  who  is  charged  with 
producing  intelligence  which  reflects  the  judgments  of  all  of  the  in- 
telligence organizations  in  the  executive  branch.  He  is  also  supposed 
to  "coordinate"  the  activities  of  these  organizations. 

— The  Central  Intelligence  Agency^  which  houses  the  government's 
central  analytical  staff  for  the  production  of  intelligence,  but  which 
devotes  its  major  efforts  to  developing  new  means  of  technical  collec- 
tion and  to  operating  America's  clandestine  intelligence  service 
throughout  the  world.  In  the  latter  capacity  it  carries  out  covert  action, 
paramilitary  operations  and  espionage. 

— The  Department  of  State^  which  is  the  primary  source  of  intelli- 
gence on  foreign  political  and  economic  matters,  and  as  such  is  both  a 
competitor  in  the  collection  and  evaluation  of  intelligence  and  a  po- 
tential source  of  external  control  over  clandestine  intelligence  activities 
of  the  Central  Intelligence  Agency. 

— The  Department  of  Defense^  which  is  the  major  collector  of  in- 
telligence, the  largest  consumer,  as  well  as  the  principal  manager  of 
the  resources  devoted  to  intelligence.  It  houses  the  largest  intelligence 
collection  organization,  the  National  Security  Agency  (NSA),  and 
the  largest  intelligence  analysis  organization,  the  Defense  Intelligence 
Agency  (DIA). 

C.  The  Intelligence  Process  :  Theory  and  Reality 

These  organizations,  and  some  of  their  offshoots,  constitute  the 
United  States  intelligence  community.  In  theory  at  least,  their  opera- 
tions can  be  described  in  simple  terms  by  the  following  cycle : 


18 

— Those  who  use  intelligence,  the  "consumers,"  indicate  the  kind 
of  information  needed. 

— These  needs  are  translated  into  concrete  "requirements"  by  senior 
intelligence  managers. 

— The  requirements  are  used  to  allocate  resources  to  the  "collectors" 
and  serve  to  guide  their  efforts. 

— The  collectors  obtain  the  required  information  or  "raw 
intelligence." 

— The  "raw  intelligence"  is  collated  and  turned  into  "finished  in- 
telligence" by  the  "analysts." 

—The  finished  intelligence  is  distributed  to  the  consumer  and  the 
intelligence  managers  who  state  new  needs,  define  new  requirements, 
and  make  necessary  adjustments  in  the  intelligence  programs  to  im- 
prove effectiveness  and  efficiency. 

In  reality  this  pattern  is  barely  recognizable. 

There  are  many  different  consumers,  from  the  President  to  the 
weapons  designer.  Their  needs  can  conflict.  Consumers  rarely  take 
the  time  to  define  their  intelligence  needs  and  even  if  they  do  so  there 
is  no  effective  and  systematic  mechanism  for  translating  them  into 
intelligence  requirements. 

Therefore,  intelligence  requirements  reflect  what  intelligence  man- 
agers think  the  consumers  need,  and  equally  important,  what  they 
think  their  organizations  can  produce.  Since  there  are  many  managers 
and  little  central  control,  each  is  relatively  free  to  set  his  own 
requirements. 

Resources  therefore  tend  to  be  allocated  according  to  the  priorities 
and  concerns  of  the  various  intelligence  bureaucracies.  Most  intelli- 
gence collection  operations  are  part  of  other  organizations — the  De- 
partment of  Defense,  the  Department  of  State — and  so  their  require- 
ments and  their  consumers  are  often  the  first  to  be  served. 

Collecting  intelligence  is  not  an  automatic  process.  There  are  many 
different  kinds  of  intelligence,  from  a  radar  return  to  an  indiscreet  re- 
mark, and  the  problems  in  acquiring  it  vary  greatly.  Information  that 
is  wanted  may  not  be  available,  or  years  may  be  required  to  develop 
an  agency  or  a  technical  device  to  get  it.  Meanwhile  intelligence  agen- 
cies collect  what  they  can. 

In  the  world  of  bureaucracy,  budgets,  programs,  procurement, 
and  managers,  the  needs  of  the  analyst  can  be  lost  in  the  shuffle.  There 
has  been  an  explosion  in  the  volume  and  quality  of  raw  intelligence  but 
no  equivalent  increase  in  the  capacity  of  analytical  capabilities.  As  a 
result,  "raw"  intelligence  increasingly  dominates  "finished"  intelli- 
gence; analysts  find  themselves  on  a  treadmill  where  it  is  difficult  to 
do  more  than  summarize  and  put  in  context  the  intelligence  flowing 
in.  There  is  little  time  or  reward  for  the  task  of  providing  insight. 

In  the  end  the  consumer,  particularly  at  the  highest  levels  of  the 
government,  finds  that  his  most  important  questions  are  not  only 
unanswered,  but  sometimes  not  even  addressed. 

To  some  extent,  all  this  is  in  the  nature  of  things.  Many  questions 
cannot  be  answered.  The  world  of  intelligence  is  dominated  by  uncer- 
tainty and  chance,  and  those  in  the  intelligence  bureaucracy,  as  else- 


19 

where  in  the  Government,  try  to  defend  themselves  against  uncer- 
tainties in  ways  which  militate  against  efficient  management  and 
accountability. 

Beyond  this  is  the  fact  that  the  organizations  of  the  intelligence 
community  must  operate  in  peace  but  be  prepared  for  war.  This  has 
an  enormous  impact  on  the  kind  of  intelligence  that  is  sought,  the  way 
resources  are  allocated,  and  the  way  the  intelligence  community  is 
organized  and  managed. 

Equally  important,  the  instruments  of  intelligence  have  been  forged 
into  weapons  of  psychological,  political,  and  paramilitary  warfare. 
This  has  had  a  profound  effect  on  the  perspective  and  preoccupa- 
tions of  the  leadership  of  the  intelligence  community,  downgrading 
concerns  for  intelligence  in  relation  to  the  effective  execution  of 
operations. 

These  problems  alone  would  undermine  any  rational  scheme,  but 
it  is  also  important  to  recognize  that  the  U.S.  intelligence  community 
is  not  the  work  of  a  single  author.  It  has  evolved  from  an  interaction 
of  the  above  internal  factors  and  the  external  forces  that  have  shaped 
America's  history  since  the  end  of  the  Second  World  War. 

D.  Evolution  of  the  TjNrrED  States  Intelligence  Community 

The  evolution  of  the  United  States  intelligence  community  since 
World  War  II  is  part  of  the  larger  history  of  America's  effort  to 
come  to  grips  with  the  spread  of  communism  and  the  growing  power 
of  the  Soviet  Union.  As  the  war  ended,  Americans  were  torn  by  hopes 
for  peace  and  fear  for  the  future.  The  determination  to  return  the 
nation  promptly  to  normal  was  reflected  in  demobilization  of  our 
wartime  military  establishment.  In  the  field  of  intelligence,  it  was 
clear  in  President  Truman's  decision  to  dismantle  the  Office  of  Stra- 
tegic Services,  scattering  its  functions  to  the  military  departments  and 
the  Department  of  State. 

The  Second  World  War  saw  the  defeat  of  one  brand  of  totalitarian- 
ism. A  new  totalitarian  challenge  quickly  arose.  The  Soviet  Union,  a 
major  ally  in  war,  became  America's  principal  adversary  in  peace.  The 
power  of  fascism  was  in  ruin  but  the  power  of  communism  was  mobil- 
ized. Not  only  had  the  communist  parties  in  France,  Italy,  and  Greece 
emerged  politically  strengthened  by  their  roles  in  the  Resistance,  but 
the  armies  of  the  Soviet  Union  stretched  across  the  center  of  Europe. 
And,  within  four  years,  America's  nuclear  monopoly  would  end. 

American  military  intelligence  officers  were  among  the  first  to  per- 
ceive the  changed  situation.  Almost  immediately  after  the  fall  of  Ber- 
lin to  the  Red  Army,  U.S.  military  intelligence  sought  to  determine 
Soviet  objectives.  Harry  Rositzke,  later  to  become  chief  of  the  CIA's 
Soviet  Division,  but  at  the  time  a  military  intelligence  officer,  was 
despatched  to  Berlin  by  jeep.  Although  the  Soviet  Union  was  still  an 
ally,  Rositzke  was  detained,  interrogated,  then  ordered  expelled  by 
the  Soviet  occupying  forces.  He  managed,  however,  to  escape  his  So- 
viet "escort"  and  arrive  in  Berlin.  He  described  his  experience  to  the 
Committee : 

We  got  on  the  outskirts  of  Berlin  and  yelled  out  "Ameri- 
kanski,"  and  were  highly  welcomed.  And  as  we  went  over  the 
Autobahn  the  first  basic  impression  I  got,  since  I  had  known 


20 

Germany  well  before  the  war,  was  a  lon^  walking  2^oiip  of 
German  males  under  16  and  over  60  who  were  being  shep- 
herded to  the  east  by  four-foot-ten,  five-foot  Mongolian  sol- 
diers with  straw  shoes. 

The  Russians  also  had  been  looting.  With  horses  and  farm 
wagons  they  were  taking  away  mattresses,  wall  fixtures, 
plumbing  fixtures,  anything  other  than  the  frame  of  the 
houses. 

We  then  made  our  way  throuofh  the  rubble  of  Berlin — most 
were  one-way  streets — identifvinsr  every  shoulder  patch  we 
could,  and  passed  the  Siemans-Halske  works,  in  front  of 
which  were  40  or  50  lend-lease  trucks,  on  each  of  which  was  a 
larjre  shiny  lathe,  drill  press,  et  cetera. 

When  we  had  seen  enoucfh  and  were  all  three  extremely 
nervous,  we  headed  straight  west  from  Berlin  to  the  British 
Zone.  When  we  arrived  we  had  an  enormous  amount  of  ex- 
uberance and  a  real  sense  of  relief,  for  the  entire  36  hours  had 
put  us  in  another  world.  The  words  that  came  to  my  mind 
then  were,  "Russia  moves  west."  ^ 
At  home,  the  Truman  Administration  was  preoccupied  by  the  tran- 
sition from  war  to  an  uncertain  peace.  Though  dispersed,  and  in  some 
cases  disbanded,  America's  Dotential  capabilities  in  the  field  of  intelli- 
gence were  considerable.  There  were  a  large  number  of  well-trained 
former  OSS  operation  officers ;  the  military  had  developed  a  remark- 
able capacity  for  cry  otologic  intelli<Tence  (the  breaking  of  codes)  and 
communicntions  intelligence  (COMINT')  ;  there  was  also  a  cadre  of 
former  OSS  intelligence  analysts  both  within  the  government  and  in 
the  academic  community. 

E.  The  Origins  of  the  Postwar  Intelligence  Community  * 

With  the  experiences  of  World  War  II  and  particularly  Pearl  Har- 
bor still  vivid,  there  was  a  recognition  within  the  government  that, 
notwithstandino-  demobilization,  it  was  essential  to  create  a  central- 
ized body  to  collate  and  coordinate  intelligence  information.  There 
was  also  a  need  to  eliminate  frictions  between  competing  military 
intelligence  services.  Although  there  was  disagreement  about  the  struc- 
ture and  authoritv  of  the  Dostwar  i^telli.o-ence  service.  President  Tru- 
man and  his  senior  advisers  concluded  that,  unlike  the  OSS,  this 
centralized  body  should  be  civilian  in  character. 

The  military  resisted  this  judgment.  Virtually  all  of  America's 
competing  intelligence  assets  were  in  the  armed  services.  Then,  as 
now,  the  military  considered  an  intelligence  capability  essential  in 
wartime  and  equally  imnortant  in  time  of  peace  to  be  prepared  for 
military  crises.  Thus,  the  services  were  strongly  opposed  to  having 
their  authority  over  intellifrence  diminished.  In  contrast,  factions 
within  thp  State  Department  were  reluctant  to  accept  any  greater 
responsibility  or  role  in  t^ho  field  of  clandestine  intellificence. 

Six  months  after  V-J  Day,  and  three  months  after  he  hnd  dis- 
banded OSS,  President  Truman  established  the  Central  Intelligence 


^  Harry  Rozitzke  testimonv,  10/31/75.  p.  7. 

*  For  an  organizational  history  of  the  CIA,  see  Chapter  "VI. 


21 

Group  (CIG).  CIG  was  the  direct  predecessor  of  the  CIA.  It  re- 
ported to  the  National  Intelligence  Authority,  a  body  consisting  of 
the  Secretaries  of  State,  War  and  Navy  and  their  representatives.  CIG 
had  a  brief  existence.  It  never  was  able  to  overcome  the  constraints 
and  institutional  resistances  found  in  the  Department  of  State  and 
the  armed  services. 

The  National  Security  Act  of  1947  '  was  passed  on  July  26, 1947.  The 
Act  included,  in  large  part,  the  recommendations  of  a  report  prepared 
for  Secretary  of  the  Navy  James  Forrestal  by  New  York  investment 
broker  Ferdinand  Eberstadt.  Though  largely  concerned  wnth  the  crea- 
tion of  the  National  Security  Council  (NSC)  and  the  unification  of  the 
military  services  within  the  Department  of  Defense,  the  Act  also 
created  a  Director  of  Central  Intelligence  (DCI)  and  a  Central 
Intelligence  Agency  (CIA).  The  powers  of  the  DCI  and  the  CIA 
were  an  amalgam  of  careful  limits  on  the  DCI's  authority  over  the 
intelligence  community  and  an  open-ended  mission  for  the  CIA  itself. 
The  power  of  the  DCI  over  military  and  diplomatic  intelligence  was 
confined  to  "coordination."  At  the  same  time,  however,  the  Agency 
was  authorized  to  carry  out  unspecified  "services  of  common  concern" 
and,  more  importantly,  could  "carry  out  such  other  functions  and 
duties"  as  the  National  Secui-ity  Council  might  direct. 

Nowhere  in  the  1947  Act  was  the  CIA  explicitly  empowered  to  col- 
lect intelligence  or  intervene  secretly  in  the  affairs  of  other  nations. 
But  the  elastic  phrase,  "such  other  functions,"  was  used  by  successive 
presidents  to  move  the  Agency  into  espionage,  covert  action,  para- 
military operations,  and  technical  intelligence  collection.  Often  con- 
ceived as  having  granted  significant  peacetime  power's  and  flexibility 
to  the  CIA  and  the  NSC,  the  National  Security  Act  actually  legislated 
that  authority  to  the  President. 

The  1947  Act  provided  no  explicit  charter  for  military  intelligence. 
The  charter  and  mission  of  military  intelligence  activities  was  estab- 
lished either  by  executive  orders,  such  as  the  one  creating  the  National 
Security  Agency  in  1952,  or  various  National  Security  Council  di- 
rectives. These  National  Security  Council  Intelligence  Directives 
(NSCID's)  w^ere  the  principal  means  of  establishing  the  roles  and 
functions  of  all  the  various  entities  in  the  intelligence  connnunity. 
They  composed  the  so-called  "secret  charter"  for  the  CIA.  However, 
most  of  them  also  permitted  "departmental"  intelligence  activities, 
and  in  this  way  also  provided  the  executive  charter  for  the  intelligence 
activities  of  the  State  Department  and  the  Pentagon.  However,  the 
intelligence  activities  of  the  Department  of  Defense  remained  with 
the  military  rather  than  with  the  new  Defense  Dei^artment  civilians. 
At  the  end  of  the  war,  the  Joint  Chiefs  of  Staff  decided  to  continue 
the  inter-Service  coordinating  mechanism — the  Joint  Intelligence 
Committee— which  had  been  created  in  1942.  With  the  1947  Act  and 
the  establishment  of  the  Joint  Chiefs  of  Staff,  a  working  level  intelli- 
gence operation  was  created  in  the  Joint  Staff,  known  as  the  Joint 
Intelligence  Group,  or  J-2. 

The  structure  created  by  the  1947  Act  and  ensuing  NSCID's  was 
highly  decentralized.  The  task  of  the  CIA  and  the  Director  of  Central 


See  Chapter  VII  for  an  analysis  of  the  1M7  Act. 


22 

Intelligence  was  to  "coordinate"  the  intelligence  output  of  all  the  vari- 
ous intelligence  collection  programs  in  the  military  and  the  Depart- 
ment of  State.  The  CIA  and  its  Director  had  little  power  to  act  itself, 
but  the  potential  was  there. 

F.  The  Response  to  the  Soviet  Threat 

Immediately  after  its  establishment,  the  CIA  and  other  elements 
of  the  intelligence  community  responded  to  the  external  threats  fac- 
ing the  United  States. 

— The  threat  of  war  in  Europe.  Following  the  Avar  there  was  a  dis- 
tinct possibility  of  a  Soviet  assault  on  Western  Europe.  Communist 
regimes  had  been  established  in  Poland,  Hungary,  Romania  and  Bul- 
garia. Czechoslovakia  went  Communist  in  1948  through  a  coup  sup- 
ported by  the  Russian  Army.  There  was  a  Russian-backed  civil  war  in 
Greece.  And,  above  all,  there  was  the  presence  of  the  Soviet  Army  in 
Eastern  Europe  and  the  pressure  on  Berlin. 

In  light  of  these  developments,  IT.S.  policvmakers  came  to  the  con- 
clusion that  outright  war  with  the  Soviet  T^nion  was  possible.  The  U.S. 
intelligence  commuiiity  responded  accordinglv.  The  CIA  assumed  the 
espionage  task,  running  agents  and  organizing  "stay-behind  networks" 
in  the  event  the  Soviets  rolled  west.  Agents,  mostly  refu<Tees,  were  sent 
into  the  East  to  report  on  Soviet  forces  and,  in  particular,  any  moves 
that  signalled  war.  The  U.S.  went  so  far  as  to  establish  contact  with 
Ukrainian  guerrillas- — a  relationship  that  was  maintained  until  the 
guerrillas  were  finally  wiped  out  in  the  early  1950s  bv  Soviet  security 
forces.  CIA  activi^^ies.  however,  were  outnumbered  bv  the  clandestine 
collection  operations  of  the  military,  particularlv  in  Western  Europe, 
where  the  Army  maintained  a  large  covert  intelligence  and  paramili- 
tary capability. 

— Turmoil  in  the  West.  Tl^e  Soviets  had  poAverful  political  resources 
in  the  West — the  Communist  parties  and  trade  unions.  Provided  with 
financial  and  advisory  support  from  the  Soviet  Union,  the  Communist 
parties  sought  to  exploit  and  exacerbate  the  economic  and  political 
turmoil  in  postwar  Europe.  As  the  elections  in  1948  and  1949  in  Italy 
and  France  approached,  the  democratic  parties  were  in  disarray  and 
the  possibilitv  of  a  Communist  takeover  was  real.  Coordinated  Com- 
munist political  unrest  in  western  countries  combined  with  extremist 
pressure  from  the  Soviet  ITnion,  confirmed  the  fears  of  many  that 
America  faced  an  expansionist  Communist  monolith. 

The  ITnited  States  res^^onded  with  overt  economic  aid — the  Truman 
Doctrine  and  the  Marshall  Plan— and  covert  political  assistance.  This 
latter  task  was  assigned  to  the  Office  of  '^pe'^ial  Proiects,  later  renamed 
the  Office  of  Po^icv  Coordination  (OPC).  The  Office  was  housed  in  the 
CIA  but  was  directly  responsible  to  the  Departments  of  State  and 
Defense.  Clandestine  support  from  the  TTnited  States  for  European 
democratic  parties  was  rejrarderl  as  an  essential  response  to  the  threat 
of  "international  communism."  OPC  became  the  fastest  growing  ele- 
ment in  the  CIA.  To  facilitate  its  onerations.  as  well  as  to  finance  CIA 
espionage  activities,  the  Con.q-ress  passed  the  Central  Intelligence 
Agency  Act  of  1949,  which  authorized  the  Director  of  CIA  to  spend 
funds  on  his  voucher  without  havine;  to  account  for  disbursements. 


23 

— Nuclear  weapons.  The  advent  of  nu'clear  weapons  and  the  Soviet 
potential  in  this  field  led  to  efforts  to  ascertain  the  status  of  the  Soviet 
Union's  nuclear  program.  By  the  time  of  the  Soviet's  first  atomic  explo- 
sion in  1949,  the  U.S.  Air  Force  and  Navy  had  begun  a  peripheral 
reconnaissance  program  to  monitor  other  aspects  of  Soviet  nuclear 
development  and  Soviet  military  capabilities.  As  the  Soviet  strategic 
nuclear  threat  grew,  Ainerica's  efforts  to  contain  it  would  grow  in 
scale  and  sophistication  until  it  would  overshadow  the  classic  tools  of 
espionage. 

.  G.  Korea  :  ttie  Turning  Point 

The  Communist  attack,  feared  in  Europe,  took  place  in  Asia.  The 
Korean  War,  following  less  than  a  year  after  the  fall  of  China  to  the 
Communists,  marked  a  turning  point  for  the  CIA.  The  requirements 
of  that  war,  the  involvement  of  China,  the  concern  that  war  in  Europe 
might  soon  follow,  led  to  a  fourfold  expansion  of  the  CIA — ^particu- 
larly in  the  paramilitary  field.  This  period  was  characterized  by  efforts 
to  infiltrate  agents  into  mainland  China,  which  led  to  the  shoot- 
down  and  capture  of  a  number  of  Americans. 

The  CIA's  activities  elsewhere  in  Asia  also  expanded.  Instrumen- 
tal in  helping  Ramon  Magsaysay  defeat  the  communist  Hukbalahaps 
in  the  Philippines,  the  CIA  also  assisted  the  French  in  their  losing 
struggle  against  the  Viet  Minh  in  Indochina. 

The  failure  to  anticipate  the  attack  on  Korea  was  regarded  as  a 
major  intelligence  failure.  The  new  Director  of  the  CIA,  General 
Bedell  Smith,  was  determined  to  improve  CIA's  estimating  and  fore- 
casting capabilities.  He  called  on  William  Langer,  formerly  chief  of 
the  Research  and  Analysis  section  of  the  OSS,  to  come  to  Washington 
from  Harvard,  in  1950,  to  head  a  small  staff  for  analysis  and  the  pro- 
duction of  intelligence.  An  Office  of  National  Estimates  (ONE)  was 
established  to  produce  finished  intelligence  estimates.  ONE  drew  on 
the  intelligence  information  resources  of  the  entire  U.S.  intelligence 
community  and  was  aided  by  a  Board  of  National  Estimates  composed 
of  leading  statesmen  and  academic  experts. 

Bv  the  end  of  the  Korean  War  and  the  naming  of  Allen  Dulles  as 
DCI,  the  powers,  responsibilities  and  basic  structure  of  the  CIA  were 
established.  The  Agency  had  assumed  full  responsibility  for  covert 
operations  in  1950,  and  by  1952  covert  action  had  exceeded  the  money 
and  manpower  allotted  to  the  task  of  espionage — a  situation  that 
would  persist  until  the  early  1970s. 

Paramilitary  actions  were  in  disrepute  because  of  a  number  of  fail- 
ures during  the  Korean  War.  However,  the  techniques  of  covert  mili- 
tary assistance  in  training  had  been  developed,  and  the  pattern  of  CIA 
direction  of  Special  Forces  and  other  unconventional  components  of 
the  U.S.  Armed  Forces  in  clandestine  operations  had  been  estab- 
lished. 

In  the  field  of  espionage,  the  CIA  had  become  the  predominant,  but 
by  no  means  the  exclusive  operator.  Clandestine  human  collection  of 
intelligence  bv  the  military  services  continued  at  a  relatively  high 
rate.  The  militarv  also  had  a  large  stake  in  clandestine  technical 
collection  of  intelligence. 


24 

Major  structural  changes  in  tlie  intelligence  community  were 
brouo^ht  about  by  the  consolidation  of  cryptanalysis  and  related  func- 
tions? Codebreaking  is  a  vital  part  of  tpchnical  intelligence  collection 
and  has  had  an  important  role  in  the  history  of  U.S.  intelligence 
efforts  The  American  "Black  Chamber"  responsible  for  breaking 
German  codes  in  WAVI  was  abolished  in  the  1920s.  As  WWII  ap- 
proached, cryptanalysis  received  increased  attention  in  the  military. 
Both  the  Army  and  Navy  had  separate  cryptologic  services  which  had 
combined  to  break  the  Japanese  code.  Known  as  ''the  magic"  this  in- 
formation signalled  the  impending  attack  on  Pearl  Harbor  but  the 
intelligence  and  alert,  system  as  a  whole  failed  to  respond. 

In  order  to  unify  and  coordinate  defense  cryptologic  and  communi- 
cations security  functions.  President  Truman  created  the  National 
Security  Agency  by  Executive  Order  on  November  4,  1952.  Prior  to 
this  tirrie,  U.S.  cryptological  capabilities  resided  in  the  separate  agen- 
cies of  the  Army.Navy,  and  Air  Force.  The  very  existence  of  still  the 
most  secret  of  all  U.S.  intelligence  agencies,  NSA,  was  not  acknowl- 
edged until  1957. 

H.  The  "Protracted  Conflict" 

With  the  end  of  the  Korean  conflict  and  as  the  mid-1950s  ap- 
proached, the  intelligence  community  turned  from  the  desperate  con- 
cern over  imminent  war  with  the  U.S.S.R.  to  the  long-term  task  of 
containing  and  competing  with  communism.  In  the  "struggle  for 
men's  minds,"  covert  action  developed  into  a  large-scale  clandestine 
psychological  and  political  program  aimed  at  competing  with  Soviet 
propaganda  and  front  organizations  in  international  labor  and  stu- 
dent activities.  Specific  foreign  governments  considered  antithetical 
to  the  United  States  and  its  allies  or  too  receptive  to  the  influence  of 
the  Soviet  Union,  such  as  Mosedegh  in  Iran  in  1958  and  Arbenz  in 
Guatemala  in  1954,  were  toppled  with  the  help  of  the  CIA.  Anti- 
communist  parties  and  groups  were  given  aid  and  encouragement  such 
as  the  Sumatran  leaders  who,  in  1958,  sought  the  overthrow  of  Presi- 
dent Sukarno  of  Indonesia. 

At  the  same  time,  the  CIA  was  moving  into  the  field  of  technical 
intelligence  and  reconnaissance  in  a  major  way.  The  U.S.  military 
had  recognized  the  value  of  aerial  reconnaissnnce  within  a  few  short 
years  after  the  Wright  brothers'  successful  flight  in  1903  and  had 
borne  major  responsibility  for  reconnaissance  against  Communist 
bloc  countries.  But  it  was  the  CIA  in  1959  thnt  beo-an  work  on  the  U-2. 

It  proved  to  be  a  technical  triumnh.  The  U-2  established  that 
the  Soviet  Union  was  not.  as  had  been  feared,  about  to  turn  the 
tables  of  the  strategic  balance.  It  gained  more  information  about 
Soviet  military  developments  tl^an  had  been  acquired  in  the  previous 
decade  of  espionage  operations.  But  there  were  risks  in  this  oper- 
ation. Despite  the  effort  to  minimize  them  with  a  special  system  of 
high-level  NSC  review  and  apnroval,  Francis  Garv  Powers  was  shot 
down  in  a  U-2  over  the  Soviet  Union  on  the  eve  of  the  Paris  summit 
conference  in  1960.  President  Eisenhower's  acceptance  of  responsi- 
bility and  Nikita  Khrushchev's  reaction  led  to  the  collapse  of  the 
conference  before  it  be.fjan. 

Nonetheless  the  U-2  proved  the  A^alue  of  exotic  and  advanced  tech- 
nical means  of  intelligence  collection.  It  was  followed  by  a  transfor- 


25 

mation  of  the  intelligence  community.  As  the  1950s  gave  way  to  the 
1960s,  large  budgets  for  the  development  and  operation  of  technical 
collection  systems  created  intense  competition  among  the  military 
services  and  the  CIA  and  major  problems  in  management  and 
condensation. 

To  support  the  Director  of  Central  Intelligence's  task  of  coordinat- 
ing the  activities  of  the  intelligence  community,  the  United  States 
Intelligence  Board  (USIB)  was  established  in  1958.  Made  up  of  senior 
representatives  of  the  State  Department,  the  Department  of  Defense, 
the  military  services.  Treasury  (since  1973)  and  the  FBI,  USIB 
was  to  coordinate  the  setting  of  requirements  for  intelligence,  approve 
National  Intelligence  Estimates  and  generally  supervise  the  operations 
of  the  intelligence  agencies.  However,  the  real  power  to  set  require- 
ments and  allocate  resources  to  intelligence  programs  remained  de- 
centralized and  in  the  hands  of  the  principal  collectors — the  military 
services,  the  Foreign  Service  and  the  clandestine  service  of  the  CIA. 
As  collection  programs  mushroomed,  USIB  proved  unequal  to  the 
task  of  providing  centralized  management  and  eliminating  duplication. 

I.  Third  World  Competition  and  Nuclear  Crisis 

While  the  United  States'  technical,  military  and  intelligence  capa- 
bilities advanced,  concern  intensified  over  the  vulnerability  of  the 
newly  independent  nations  of  Africa  and  Asia  to  communist  sub- 
version. And  in  the  Western  Hemisphere  the  establishment  of  a  com- 
munist Cuba  by  Fidel  Castro  was  seen  as  presaging  a  major  incursion 
of  revolutionary  communism  to  the  Western  Hemisphere. 

At  his  inauguration  in  January,  1961,  President  Kennedy  pro- 
claimed that  America  would  "pay  any  price  and  bear  any  burden"  so 
that  liberty  might  prevail  in  the  world  over  the  "forces  of  communist 
totalitarianism."  Despite  the  catastrophe  of  the  CIA-sponsored  Bay 
of  Pigs  invasion  only  four  months  later,  the  covert  action  and  para- 
military operations  staffs  of  the  CIA  were  to  shoulder  a  significant 
part  of  that  burden.  In  Latin  America  the  Alliance  for  Progress,  the 
overt  effort  to  help  modernize  the  southern  half  of  the  hemisphere,  was 
accompanied  by  a  significant  expansion  of  covert  action  and  internal 
security  operations  aimed  at  blocking  the  spread  of  Castro's  influence 
or  ideology.  This  was  accompanied  by  an  intense  paramilitary  cam- 
paign of  harassment,  sabotage,  propaganda  against  Cuba,  and  at- 
tempted assassination  against  Castro. 

Nearby,  in  the  Dominican  Republic,  the  United  States  had  already 
supported  the  assassins  of  Dictator  Raphael  Trujillo  in  order  to  pre- 
empt a  Castro-type  takeover.  In  Africa,  significant  paramilitary  aid 
was  given  in  support  of  anti-Soviet  African  leaders.  In  Asia,  American 
intelligence  had  been  involved  for  a  long  time  in  the  Indochina  strug- 
gle. The  CIA,  along  with  the  rest  of  the  United  States  government, 
was  drawn  ever  deeper  into  the  Vietnamese  conflict. 

Early  in  the  decade  the  United  States  faced  its  most  serious  post- 
war crisis  affecting  its  security — the  Cuban  Missile  Crisis  of  October 
1962.  It  illustrated  a  number  of  important  facts  concerning  the  nature 
and  structure  of  American  intelligence. 

During  the  summer  of  1962  overhead  reconnaissance  confirmed  agent 
intelligence  reports  that  some  form  of  unusual  military  installation 
was  being  placed  in  Cuba.  By  October  16  it  was  clear  that  these  were 


26 

medium  and  intermediate-range  ballistic  missile  sites  capable  of  han- 
dlino;  nuclear  weapons  that  could  strike  targets  throughout  significant 
areas  of  tlie  T^nited  States. 

As  the  United  States  moved  towards  a  confrontation  with  the  So- 
viet Union,  U.S.  intelligence  played  a  significant  role  at  every  turn. 
Overhead  reconnaissance  of  the  Soviet  strategic  posture  w^as  vastly 
superior  to  that  of  the  Russians.  Reports  from  Col.  Oleg  Penkovsky, 
the  U.S.  agent  in  the  Kremlin,  kept  the  United  States  abreast  of  the 
Soviet  military  response  to  the  crisis.  U.S.  tactical  reconnaissance  of 
Cuba  not  only  prepared  the  United  States  for  possible  invasion  but 
signalled  the  earnestness  of  our  intention  to  do  so  should  the  situation 
deteriorate.  Naval  reconnaissance  kept  close  tabs  on  Soviet  ships  bear- 
ing ballistic  missile  components.  As  the  crisis  neared  its  showdown 
with  a  quarantine,  the  President  demanded  and  received  the  most  de- 
tailed tactical  intelligence,  including  the  distance  in  yards  between 
American  naval  vessels  and  the  Soviet  transport  ships. 

This  crisis  dramatized  the  importance  of  integrated  intelligence 
collection  and  production  in  times  of  crisis.  It  also  clearly  illustrated 
the  difficulty  in  distinguishing  between  national  and  so-called  tactical 
intelligence.  This  distinction  has  been  a  central  feature  of  the  struc- 
ture of  the  American  intelligence  community  with  the  military  serv- 
ices maintaining  control  over  tactical  intelligence  and  the  so-called 
national  intelligence  assets  subject  to  varying  degrees  of  control  by 
the  Director  of  Central  Intelligence  or  the  Secrtary  of  Defense  and 
the  National  Security  Council.  Cuba  proved  that  in  time  of  crisis 
these  distinctions  evaporate. 

J.  Technology  xVNd  Tragedy 

During  the  1960s  the  U.S.  intelligence  community  was  dominated 
by  two  developments:  First,  the  enormous  exnlosion  in  the  volume  of 
technical  intelligence  as  the  research  and  development  efforts  of  the 
previous  period  came  to  fruition;  second,  the  ever-growing  involve- 
ment of  the  United  States  in  the  war  in  Vietnam. 

The  increase  in  the  quantity  and  quality  of  technically  acquired 
information  on  Soviet  military  forces,  in  particular  strategic  forces, 
made  possible  precise  measurement  of  the  existing  level  of  Soviet 
strategic  deployments.  However,  it  did  not  answer  questions  about 
the  ultimate  scale  of  Soviet  strateqic  deployments,  nor  did  it  provide 
fi]-m  information  on  the  quality  of  their  forces.  While  it  provided  an 
additional  clue  as  to  Soviet  intentions,  it  did  not  offer  any  definitive 
nnswers. 

In  the  Pentaoon  disparate  estimates  of  future  Soviet  strateo'ic  power 
from  each  of  the  Armed  Services  led  Secretary  Robert  McNamara  to 
establish  the  Defense  Intelligence  Agency.  The  Secretary  of  Defense 
Avas  in  the  ironic  position  of  being  responsible  for  the  bulk  of  American 
intelligence  collection  activity  but  lackino-  the  means  to  coordinate 
either  the  collection  programs  or  the  intelligence  produced.  The  DIA 
was  to  fulfill  this  need,  but  in  a  compromise  with  the  military  services 
the  DI;V  Mas  made  to  renort  to  the  Secretary  of  Defense  through  the 
Joint  Chiefs  of  Staff.  The  DIA  has  never  fulfilled  its  promise. 

In  the  CIA  the  analysts  confronted  bv  the  new  mass  of  technical 
intelligence  information  underestimated  the  ultimate  scale  of  Soviet 


27 

dployments  wliile  tending  to  overestimate  the  qualitative  aspects  of 
Soviet  weapons  systems.  Previously,  intelligence  analysts  had  to  build 
up  their  picture  of  Soviet  capability  from  fragmentary  information, 
inference  and  speculation,  particularly  as  to  Soviet  purposes.  Con- 
fronted with  the  challenge  to  exploit  the  new  sources  of  intelligence  on 
Soviet  programs,  the  analysts  in  the  intelligence  community  turned 
away  from  the  more  speculative  task  of  understanding  Soviet  purposes 
and  intentions,  even  though  insight  into  these  questions  was  central  to 
a  greater  understanding  of  the  technical  information  being  acquired 
in  such  quantity. 

The  war  in  Vietnam  also  ])Osed  serious  problems  in  the  analysis  and 
production  of  intelligence.  In  effect,  the  analysts  were  continually  in 
the  position  of  having  to  bring  bad  news  to  top  policymakers.  The  re- 
sult produced  some  serious  anomalies  in  the  nature  of  intelligence 
estimates  concerning  the  Vietnam  conflict.  For  example,  the  CIA  con- 
tinually flew  in  the  face  of  the  Pentagon  and  the  evident  desires  of 
the  White  House  by  denigrating  the  effectiveness  of  the  bombing  cam- 
i:)aig7is  over  North  Vietnam,  but  as  American  involvement  deepened 
from  1965  onward,  the  CIA  was  unwilling  to  take  on  the  larger  and 
more  im]Dortant  task  of  assessing  the  possiljility  for  the  success  of  the 
overall  U.S.  effort  in  Vietnam. 

The  increase  in  technical  collection  capabilities  of  the  United  States 
were  also  brought  to  bear  on  that  conflict,  creating  in  its  turn  important 
questions  about  the  application  of  such  resources  to  tactical  situations. 
As  one  intelligence  officer  ])ut  it,  local  military  commanders  in  Viet- 
nam "were  getting  SIGINT  (signals  intelligence)  with  their  orange 
juice  every  morning  and  have  now  come  to  expect  it  eveiywhere."  This 
involves  two  problems :  first,  whether  "national"  intelligence  re- 
sources aimed  at  strategic  ])roblems  should  be  diverted  to  be  used  for 
local  combat  application  and,  second,  Avhether  this  might  not  lead  to  a 
compromise  of  the  technical  collection  systems  and  the  elimination  of 
their  effectiveness  for  broader  strategic  missions. 

K.  The  1970s 

Together,  the  advent  of  increased  technical  capabilities  and  the  Viet- 
nam War  brought  to  a  climax  concerns  within  the  Government  over 
the  centralized  management  of  intelligence  resources.  This  coincided 
with  increased  dissatisfaction  in  tlie  Nixon  Administration  over  the 
quality  of  intelligence  produced  on  the  war  and  on  Soviet  strategic 
developments. 

In  the  nation  as  a  whole,  the  impact  of  the  Vietnam  War  destroyed 
the  foreign  policy  consensus  which  had  under])inned  America's  in- 
telligence activities  abroad.  Starting  with  the  disclosures  of  CIA  in- 
volvement with  the  National  Student  Association  of  1967,  there  were 
a  series  of  advei-se  revelations  concerning  the  activities  of  the  Central 
Intelligence  Agency  and  the  military  intelligence  agencies. 

Concern  over  the  secret  war  in  Laos,  revulsion  at  the  Phoenix  pro- 
gram which  took  at  least  20,000  lives  in  South  Vietnam,  army  spying 
on  IT.S.  civilians,  U.S.  "destabilization"  efforts  in  Chile,  and  finally 
the  rcA'elations  concerning  Operation  CHAOS  and  the  CIA's  domestic 
intelligence  role  created  a  climate  for  a  thorough  Congressional 
investigation. 


28 

During  this  same  period,  the  Executive  moved  to  initiate  certain 
management  reforms.  Beginning  as  early  as  1968,  there  were  cutbacks 
in  the  scale  of  the  overall  intelligence  community.  These  cutbacks 
deepened  by  1970,  both  in  the  size  of  the  overall  intelligence  budget  in 
real  terms  and  in  the  manpower  devoted  to  intelligence  activities.  CIA 
covert  acti\dties  were  sharply  reduced  with  a  few  notable  exceptions 
such  as  Chile.  The  internal  security  mission  in  foreign  countries  was 
dropped.  There  was  a  re-emphasis  on  collecting  covert  intelligence 
on  the  Soviet  Union.  Terrorism  and  narcotics  were  added  to  the  list 
of  intelligence  requirements  for  our  clandestine  espionage  services. 

In  1971  James  Schlesinger,  then  serving  in  the  Office  of  Management 
and  Budget,  was  asked  to  do  a  sweeping  analysis  of  the  intelligence 
community.  That  study  led  to  an  effort  to  increase  the  authority  of  the 
Director  of  Central  Intelligence  over  the  management  of  the  intel- 
ligence community.  However,  President  Nixon  limited  the  scope  of 
reform  to  that  which  could  be  accomplished  without  legislation. 

Congress  also  took  an  increased  interest  in  the  activities  of  the  in- 
telligence connnunity.  The  role  of  the  CIA  in  the  Watergate  affair  was 
examined  in  the  Senate  Watergate  Committee's  investigation.  At  the 
close  of  1974  a  rider,  the  Hughes-Ryan  amendment,  was  added  to  the 
Foreign  Assistance  Act  which  required  the  President  to  certify  that 
covert  actions  were  important  to  the  national  interest  and  directed  that 
the  Congress  be  fully  informed  of  them.  In  this  connevtion,  the  respon- 
sibility to  inform  the  Congress  was  broadened  beyond  the  traditional 
Armed  Services  and  Appropriations  Committees  of  the  Congress  to  in- 
clude the  Senate  Foreign  Relations  Committee  and  the  House  Foreign 
Affairs  Committee.  However,  the  first  real  effort  of  the  Congress  to 
come  to  grips  with  the  challenge  posed  to  the  American  democratic 
form  of  government  by  necessarily  secret  foreign  and  militaiy  intelli- 
gence activities  came  with  the  establishment  of  the  Senate  Sekvt  Com- 
mittee on  Intelligence  in  January  of  1975.  The  results  of  its  inquiry 
are  set  forth  in  the  following  chapters  of  this  report. 

L.  The  Task  Ahead 

The  American  intelligence  community  has  changed  markedly  from 
the  early  postwar  days,  yet  some  of  the  major  problems  of  that  period 
persist.  The  intelligence  community  is  still  highly  decentralized;  the 
problem  of  maintaining  careful  command  and  control  over  risky 
secret  activities  is  still  great.  There  is  a  continuing  difficulty  in  draw- 
ing a  line  between  national  intelligence  activities,  which  should  be 
closely  supervised  by  the  highest  levels  of  government,  and  tactical 
intelligence,  which  are  the  province  of  the  military  services  and  the 
departments. 

The  positive  steps  undertaken  by  President  Ford  in  his  recent  Exe- 
cutive Order  have  not  diminished  the  need  for  a  new  statutory  frame- 
work for  American  intelligence  activities.  Only  through  the  legisla- 
tive })rocess  can  the  broad  political  consensus  be  expressed  which  is 
necessary  for  the  continuing  conduct  of  those  intelligence  activities 
essential  to  the  nation's  security  and  diplomacy. 

Clark  M.  Clifford,  who  was  one  of  the  authors  of  the  1947  National 
Security  Act  that  established  the  present  legislative  framework  for 
America's  intelligence  activities,  made  these  comments  in  open  session 
before  the  Committee: 


29 

As  one  attempts  to  analyze  the  difficulty  and  hopefully  offer 
constructive  suggestions  for  improvement,  he  finds  much  con- 
fusion existing  within  the  system.  It  is  clear  that  lines  of 
autliority  and  responsibility  have  become  blurred  and  indis- 
tinct. 

The  National  Security  Council  under  the  Act  of  1947  is 
given  the  responsibility  of  directing  our  country's  intelligence 
activities.  My  experience  leads  me  to  believe  that  this  function 
has  not  been  effectively  performed.  .  .  . 

The  1947  law  creating  the  CIA  should  be  substantially 
amended  and  a  new  law  should  be  written  covering  intelli- 
gence functions.  We  have  had  almost  thirty  years  of  expe- 
rience under  tlie  old  law  and  have  learned  a  great  deal.  I  be- 
lieve it  has  served  us  reasonably  well  but  its  defects  have  be- 
come increasingly  apparent.  A  clear,  more  definitive  bill  can 
be  prepared  that  can  accomplish  our  purposes  by  creating 
clear  lines  of  authority  and  responsibility  and  by  carefully 
restricting  certain  activities  we  can  hopefully  prevent  the 
abuses  of  the  past. 

And  Mr.  Clifford  concluded : 

We  have  a  big  job  to  do  in  this  country.  Our  people  are 
confused  about  our  national  goals  and  cynical  about  our  in- 
stitutions. Our  national  spirit  seems  to  have  been  replaced  by 
a  national  malaise.  It  is  my  conviction  that  the  efforts  of  this 
committee  will  assist  us  in  regaining  confidence  in  our  nation- 
al integrity,  and  in  helping  to  restore  to  our  nation  its  repu- 
tation in  the  world  for  decency,  fair  dealing,  and  moral  lead- 
ership.*^ 

That  is  the  spirit  in  whicli  the  Select  Committee  sought  to  pursue 
its  inquiry  and  that  is  the  spirit  in  which  the  Committee  puts  forward 
the  following  analysis  of  the  intelligence  community  and  the  operation 
of  its  constituent  parts. 


Clifford,  12/5/75,  Hearings,  p.  53. 


III.  THE  CONSTITUTIONAL  FRAMEWOEK  FOR 
INTELLIGENCE  ACTIVITIES 

A.  The  Joint  Responsibilities  or  the  Legislative  and  Execu- 
tive Branches — Separation  of  Powers  and  Checks  and  Bal- 
ances 

While  the  Constitution  contains  no  provisions  expressly  allocating- 
authority  for  intelligence  activity,  the  Constitution's  provisions  re- 
garding foreign  atfairs  and  national  defense  are  directly  relevant. 
From  the  'beginning,  U.S.  foreign  intelligence  activity  ^  has  been  con- 
ducted in  connection  with  our  foreigii  relations  and  national  defense. 
In  these  areas,  as  in  all  aspects  of  our  Government,  the  Constitution 
provides  for  a  system  of  checks  and  balances  under  the  separation  of 
powers  doctrine.  In  foreign  affairs  and  national  defense.  Congress  and 
the  President  were  both  given  important  powers.  The  Constitution,  as 
Madison  explained  in  The  Federal ist,  established  "a  partial  mixture  of 
powers.''  -  Unless  the  branches  of  government,  Madison  said,  "be  so  far 
connected  and  blended  as  to  give  each  a  constitutional  conti'ol  over 
the  others,  the  degree  of  separation  which  the  maxim  requires,  as 
essential  to  a  free  government,  can  never  in  practice  be  maintained."  ^ 
The  f  ramers'  underlying  purpose,  as  Justice  Brandeis  pointed  out,  was 
"to  preclude  the  exercise  of  arbitrary  power."  "* 

This  pattern  of  checks  and  balances  is  reflected  in  the  constitutional 
j:)rovisions  with  res])ect  to  foreign  affairs  and  national  defense.  In 
foreign  affairs,  the  President  has  the  ])ower  to  make  treaties  and  to 
appoint  Ambassadors  and  envoys,  but  this  power  is  subject  to  the 
"advice  and  consent"  of  the  Senate."'  While  the  President  has  the  exclu- 
sive power  to  receive  ambassadors  from  foreign  states,"  the  Congress 
has  important  powers  of  its  own  in  foreign  affairs,  most  notably  the 
power  to  regulate  foreign  commerce  and  to  lay  duties." 


**  A  definition  of  the  term  "foreign  intelligence  activity"  is  necessary  in  order 
to  properly  assess  the  constitutional  aspects  of  foreign  intelligence  activity.  For- 
eign intelligence  activity  is  now  understood  to  include  secret  information  gather- 
ing and  covert  action.  Covert  action  is  defined  by  the  CIA  as  secret  action  designed 
to  influence  events  abroad,  including  the  use  of  political  means  or  varying  degrees 
of  force.  The  political  means  can  range  from  the  employment  of  propaganda  to 
large-scale  efforts  to  finance  foreign  political  parties  or  groups  so  as  to  influence 
elections  or  overthrow  governments ;  covert  action  involving  the  use  of  force 
may  include  U.S.  paramilitary  operations  or  the  support  of  military  operations 
by  foreign  conventional  or  unconventional  military  organizations.  (Memoran- 
dum from  Mitchell  Rogovin,  Special  Counsel  to  the  Director  of  Central  Intel- 
ligence, House  Select  Committee  on  Intelligence,  Hearings,  12/9/7.5,  p.  1730.) 

^  The  Federalist,  No.  47  (J.  Madison). 

•''  The  Federalist,  No.  48  (J.  Madison). 

*  Meyers  v.  United  States,  272  U.S.  52.  292  (1926). 

^  United  States  Constitution,  Article  II,  Section  2. 

"Ibid.,  Sec.  3. 

'  Ibid.,  Art.  I,  Sec.  8. 

(31) 


32 

In  national  defense,  the  President  is  made  Commander-in-Chief, 
thereby  having  the  power  to  command  the  armed  forces,  to  direct 
military  operations  once  Conoress  has  declared  Avar,  and  to  repel 
sudden  attacks.^  Cono^ress,  however,  has  the  exclusive  power  to  declare 
wai',  to  laise  and  support  the  armed  forces,  to  make  rules  for  their 
government  and  reo;ulation,  to  call  forth  the  militia,  to  provide  for 
the  common  defense,  and  to  make  appropriations  for  all  national 
defense  activities.^ 

JSIoreover,  under  the  Necessary  and  Proper  clause,  the  Constitution 
s})ecifies  that  Conjjress  shall  have  the  power  "to  make  all  laws  necessary 
and  proper  for  carrying  into  execution'^  not  only  its  own  powers  but 
also  "all  other  powers  vested  by  [the]  Constitution  in  tlie  Government 
of  the  United  States,  or  in  any  Department  or  Officer  thereof."  ^° 

This  constitutional  framework — animated  by  the  checks  and  bal- 
ances concei)t — makes  clear  that  the  Constitution  contemplates  that 
the  judgment  of  both  the  Congress  and  the  President  will  be  applied 
to  major  decisions  in  foreign  affairs  and  national  defense.  The  Presi- 
dent, the  holder  of  "tlie  executive  power,"  conducts  daily  relations 
witli  otlier  nations  tlirough  the  State  Department  and  other  agencies. 
The  Senate,  through  its  "advice  and  consent"  powder  and  through  the 
work  of  its  appropriate  committees  ])articipates  in  foreign  affairs. 
As  Hamilton  observed  in  The  Fe(JeraH>it^  foreign  affairs  should  not  be 
left  to  the  "sole  disposal"  of  the  President : 

The  history  of  human  conduct  does  not  warrant  that  exalted 
opinion  of  human  virtue  which  would  make  it  wise  to  commit 
interests  of  so  delicate  and  momentous  a  kind,  as  those  which 
concern  its  intercourse  with  the  rest  of  the  world,  to  the  sole 
disposal  of  a  magistrate  created  and  circumstanced  as  would 
be  a  President  of  the  United  States.^^ 

Similarly,  in  national  defense,  the  constitutional  framework  is  a 
"partial  mixture  of  powers,"  calling  for  collaboration  between  the 
executive  and  the  legislative  branches.  The  Congress,  through  its  ex- 
clusive power  to  declare  war,  alone  decides  whether  the  nation  shall 
move  from  a  state  of  peace  to  a  state  of  war.  "\Vliile  as  Commander-in- 
Chief  the  President  commands  the  armed  forces.  Congress  is  empow- 
ered "to  make  rules"  for  their  "government  and  regulation."  ^^ 

INIoreover,  in  both  the  foreign  affairs  and  defense  fields,  while  the 
President  makes  executive  decisions,  the  Congress  with  its  exclusive 
power  over  the  purse  is  charged  with  authority  to  determine  whether, 
or  to  what  extent,  government  activities  in  these  areas  shall  be 
funded.  ^^ 

Tlie  Constitution,  while  containing  no  express  authority  for  the  con- 
duct of  foreign  intelligence  activitv,  clearly  endowed  the  Federal 
Government  (i.e..  Congress  and  the  President  jointlv)  with  all  the 
])ower  necessary  to  conduct  the  nation's  foreign  affairs  and  national 

'  Ihid..  Art.  IT,  Sect.  2. 

°  ma..  Sect.  8. 

"  Ihid. 

"  The  F^dprnlisf.  No.  75  (A.  Hamilton). 

"  TTnited  S*-ate«  Constitution.  Article  I.  Section  8. 

"76frt.,  Art.  II,  Sect.  8. 


33 

defense  and  to  stand  on  an  equal  basis  with  other  sovereign  states.  ^^ 
Inasmuch  as  foreign  intelligence  activity  is  a  part  of  the  conduct  of 
the  United  States'  foreign  affairs  and  national  defense,  as  well  as  part 
of  the  practice  of  sovereign  states,  the  Federal  Government  has  the 
constitutional  authority  to  undertake  such  activity  in  accordance  with 
applicable  norms  of  international  law.^^* 

We  discuss  below  the  manner  in  which  Congress  and  the  Executive 
branch  have  undertaken  to  exercise  this  federal  power,  and  the  con- 
sistency of  their  action  with  the  Constitution's  framework  and  system 
of  checks  and  balances. 

B.  The  Historical  Practice 

The  National  Security  Act  of  1947 "''  was  a  landmark  in  the 
evolution  of  United  States  foreign  intelligence.  In  the  1947  Act, 
Congress  created  the  National  Security  Council  and  the  CIA,  giving 
both  of  these  entities  a  statutory  charter. 

Prior  to  1947,  Congress,  despite  its  substantial  authority  in  foreign 
affairs  and  national  defense,  did  not  legislate  directly  with  respect  to 
foreign  intelligence  activity.  Under  the  Necessary  and  Proper  Clause, 
and  its  power  to  make  rules  and  regulations  for  the  Armed  Forces, 
Congress  might  have  elaborated  specific  statutes  authorizing  and  regu- 
lating the  conduct  of  foreign  intelligence.  In  the  absence  of  such  sta- 
tutes. Presidents  conducted  foreign  intelligence  activity  prior  to  the 
1947  National  Security  Act  on  their  own  authority. 

In  wartime,  the  President's  power  as  Commander-in-Chief  provided 
ample  authority  for  both  the  secret  gathering  of  information  and 
covert  action. ^^  The  authority  to  collect  foreign  intelligence  informa- 
tion before  1947  in  peacetime  can  be  viewed  as  implied  from  the  Presi- 


"As  the  Supreme  Court  has  declared,  "the  United  States,  in  their  relation 
to  foreign  countries  .  .  .  are  invested  with  the  powers  which  belong  to  independ- 
ent nations "  [Chinese  Exclusion  Case.  130  U.S.  581.  604  (1889).] 

"a  There  are  a  number  of  international  agreements  which  the  United  States 
has  entered  into  which  prohibit  certain  forms  of  intervention  in  the  domestic 
affairs  of  foreign  states.  The  Nations  Charter  in  Article  2(4)  obligates  all  U.N. 
members  to  'refrain  in  their  international  relations  from  the  threat  or  use  of 
force  against  the  territorial  integrity  of  any  state."  The  Charter  of  the  Organiza- 
tion of  American  States  (OAS)  in  Article  18 provides: 

"No  State  or  group  of  States  has  the  right  to  intervene,  directly  or  indirectly 
for  any  reason  whatever,  in  the  internal  or  external  affairs  of  any  other  State. 
The  foregoing  principle  prohibits  not  only  armed  force  but  also  any  other  form 
of  interference  or  attempted  threat  against  the  personality  of  the  State  or  against 
its  political,  economic,  and  cultural  elements." 

Under  the  Supremacy  Clause  of  the  Constitution  (Art.  VI,  Sec.  2).  treaty 
obligations  of  the  United  States  are  part  of  the  law  of  the  land.  While  the 
general  principles  of  such  treaties  have  not  been  spelled  out  in  specific  rules  of 
application,  and  much  depends  on  the  facts  of  particular  cases  as  well  as  other 
principles  of  international  law  (including  the  right  of  self-preservation,  and 
the  right  to  assist  states  against  prior  foreign  intervention)  it  is  clear  that  the 
norms  of  international  law  are  relevant  in  assessing  the  legal  and  constitutional 
aspects  of  covert  action. 

""  .50  U.S.C.  430. 

^In  Totten  v.  United  States,  92  U.S.  105  (1875).  the  Supreme  Court  iipheld  the 
authority  of  the  Pre.sident  to  hire,  without  statutory  authority,  a  secret  agent  for 
intelligence  purposes  during  the  Civil  War.  Authority  for  wartime  covert  action 
can  be  implied  from  the  President's  powers  as  Commander-in-Chief  to  conduct 
military  operations  in  a  war  declared  by  Congress.  Compare,  Totten  v.  United 
States. 


34 

dent's  power  to  conduct  foreicrii  affairs.^^  In  addition  to  the  more  or 
less  discreet  oratlierinff  of  information  by  the  reoiilar  diplomatic  serv- 
ice, the  President  sometimes  used  specially-appointed  "executive 
agents"  to  secretly  gather  information  abroad.^'  In  addition,  executive 
agents  were  on  occasion  given  secret  political  missions  that  were  simi- 
lar to  modern  day  political  covert  action.^^  These,  however,  tended  to 
be  in  the  form  of  relatively  small-scale  responses  to  paiticular  con- 
cerns, rather  than  the  continuous,  institutionalized  activity  that 
marked  the  character  of  covert  action  in  the  period  after  the  passage 
of  the  1947  National  Security  Act.  There  were  no  precedents  for  the 
peacetime  use  of  covert  action  involving  the  use  of  armed  force  of  the 
type  conducted  after  1947. 

1.  Foreign  Intelligence  and  the  Presidetifs  Foreign  Affairs  Power 

Although  the  Constitution  provides  that  the  President  "sliall  ap- 
point ambassadors,  other  public  ministers  and  consuls"  only  "by  and 
with  the  advice  and  consent  of  the  Senate,"  beginning  witli  Washing- 
ton Presidents  have  appointed  special  envoys  to  carry  out  both  overt 
diplomatic  functions  and  foreign  intelligence  missions.^^  The  great 
majority  of  these  envoys  were  sent  on  overt  missions,  such  as  to  nego- 
tiate treaties  or  to  represent  the  United  States  at  international  con- 
ferences. Some,  however,  were  sent  in  secrecy  to  carry  out  the  near 
equivalent  of  modern-day  intelligence  collection  and  covert  political 
action.  For  example,  in  connection  with  IT.S.  territorial  designs  on 
central  and  western  Canada  in  1869,  President  Grant's  Secretary  of 
State  sent  a  private  citizen  to  that  area  to  investigate  and  promote 
the  possibilitv  of  annexation  to  the  United  States.^" 

Presidential  discretion  as  to  the  appointment  of  such  executive 
agents  derived  from  the  President's  assumntion  of  the  conduct  of 
foreign  relations.  From  the  beo:inning,  the  President  represented  the 
United  States  to  the  world  and  had  exclusive  charge  of  the  channels 
and  processes  of  communication.  The  President's  role  as  "sole  orrran" 
of  tlie  nation  in  dealing  with  foreign  states  was  recognized  bv  John 
Marhall  in  1816  ^^  and  reflected  the  views  expressed  in  The  Federalist 

"Compare,  Unite<J  States  v.  Bntcnko  494  F.2d  593  (3(1  Cir.  1974)  :  "Decisions 
affecting  the  United  States'  relationship  witli  other  sovereign  states  are  more 
likely  to  advance  our  national  interests  if  the  President  is  apprised  of  the  inten- 
tions, capabilities  and  possible  responses  of  other  countries." 

"Henry  Wriston,  Executive  Agents  in  American  Foreign  Relations,  (1929, 
1967). 

"  Tbid.,  pp.  693,  et.  seq. 

^*  The  first  such  specially-appointed  individual  was  Governeur  Morris,  sent  by 
President  Washinst<^n  in  1789  as  a  "private  ag:ent"  to  Britain  to  explore  the 
possibilities  for  openins:  normal  diplomatic  relations.  Morris  was  appointed  in 
October  1789  because  Washington's  Secretary  of  State,  .Jefferson,  was  not  yet 
functio'iing.  The  mission  was  not  I'eported  to  the  Cnneress  nntii  Fehninrv  ]79l. 
He'iry  Wriston.  "The  Special  Envoy,"  Foreign  Affairs,  38  (1960),  pp.  219,  220) 

""Wriston.  Extent  ire  Agents  in  American  Foreinn   Relations,  p.   7.39. 

"^  Marshall  spoke,  not  as  Chief  Justice  in  an  opinion  of  the  Supreme  Court, 
but  rather  in  a  statement  to  the  House  of  Representatives.  The  House  of  Reii- 
resentatives  was  engaged  in  a  debate  as  fo  whether  a  dem-^nd  bv  the  Briti';h 
Government  for  the  extradition  of  one  Robbins  was  a  matter  for  the  courts 
or  for  the  President,  acting  unon  an  extradition  treaty.  Marshnll  argued  that 
the  case  Involved  "a  national  demand  made  upon  the  nation.''  Sinf^e  the  Presi- 
dent is  the  "sole  organ  of  the  nation  in  its  external  relations  "  Mnrslmll  snid. 
"of  consenuf^noe,  the  demand  en  only  be  made  upon  him."  [10  Annals  of  Con- 
gress 613  (1800),  reprinted  in  5  Wheat,  Appendix,  Note  1,  at  26  (U.S.  1820).] 


35 

that  the  characteristics  of  the  Presidency — unity,  secrecy,  decision, 
dispatch — were  especially  suited  to  the  conduct  of  diplomacy,^-  As  a 
consequence,  historical  development  saw  the  President  take  charge  of 
the  daily  conduct  of  foreign  affairs,  including  the  formulation  of  much 
of  the  nation's  for-eign  policy.  But  "sole  organ"  as  to  communications 
with  foreign  governments  and  historical  practice  did  not  amount  to 
"sole  disposal"  in  a  constitutional  sense  over  foreign  affaire;  as  Hamil- 
ton declared,  the  Constitution  did  not  grant  that  degree  of  power  to 
the  President  in  foreign  affairs.-"*  Moreover,  Marshall's  reference  to 
the  President  as  "sole  organ"  did  not  purport  to  mean  that  the  Presi- 
dent w^as  not  subject  to  congressional  regulation,  should  Congress 
wish  to  act.  For  Marshall,  in  addition  to  speaking  of  the  President  as 
"sole  organ,"  went  on  to  point  out  that  "Congress,  unquestionably,  may 
prescribe  the  mode"  by  which  such  power  to  act  was  to  be  exercised.-* 
Congress,  with  its  own  constitutional  powers  in  foreign  affairs,  its 
power  over  the  purse,  and  under  the  authority  contained  in  the  Neces- 
sary and  Proper  Clause,  had  the  option  of  regulating  the  practice  of 
using  executive  agents  on  foreign  intelligence  missions,  as  well  as  the 
conduct  of  foreign  intelligence  activity  by  other  means.-^ 

2.  The  Use  of  Force  in  Covert  Action 

Covert  action  may  include  the  use  of  armed  force.  In  modern  times, 
the  President's  authorization  of  the  CIA-financed  and  directed  in- 
vasion of  Cuba  at  the  Bay  of  Pigs  and  paramilitary  operations  in 
Laos  are  examples  of  this  type  of  covert  action. 

^^  Nor  did  Marshall  intend  to  say  that  "sole  organ"  meant  the  power  of  "sole 
disposal."  As  the  eminent  constitutional  expert  Edward  S.  Corwin  wrote, 
"Clearly,  what  Marshall  had  foremost  in  mind  was  simply  the  President's  role 
as  instrument  of  communication  with  other  governments."  (Edward  S.  Corwin, 
The  President's  Control  of  Foreign  Relations,  p.  216.) 

^  The  Federalist,  No.  75  (A.  Hamilton). 

'*  Citing  Marshall's  expression,  the  Supreme  Court  has  recognized  the  Presi- 
dent as  "sole  organ"  of  communication  and  negotiation  in  foreign  affairs.  [United 
States  V.  Curtiss-W right  Export  Corp.,  299  U.S.  304  (1952).]  Although  dicta  of 
.Justice  Sutherland  in  the  Curtiss-W  right  opinion  put  forward  a  broad  view  of 
"inherent''  Presidential  power  in  foreign  affairs,  the  case  and  the  holding  of 
the  court  involved,  as  .Justice  .Jackson  stated  in  his  opinion  in  the  Steel  Seizure 
case,  "not  the  question  of  the  President's  power  to  act  without  congressional  au- 
thority, but  the  question  of  his  right  to  act  under  and  in  accord  with  an  Act 
of  Congress."  [YonngHoiim  Steel  d  Tube  Co.  v.  Saicyer,  343  U.S.  579,  635-636 
( 1952 )  ( consurring  opinion ) .  ] 

In  Curtiss-W  right  a  joint  resolution  of  Congress  had  authorized  the  Presi- 
dent to  embargo  weapons  to  countries  at  war  in  the  Chaco,  and  imposed  criminal 
sanctions  for  any  violation.  After  President  Franklin  D.  Roosevelt  proclaimed 
an  embargo,  the  Curtiss-Wright  Corporation,  indicted  for  violating  the  embargo, 
challenged  the  congressional  resolution  and  the  President's  proclamation, 
claiming  Congress  had  made  an  improper  delegation  of  legislative  power  to 
the  President.  Speaking  for  six  justices,  .Justice  Sutherland  sustained  the  in- 
dictment, holding  only,  as  .Ju.stice  .Jackson  later  noted,  "that  the  strict  limita- 
tion upon  Congressional  delegations  of  power  to  the  President  over  internal 
affairs  does  not  apply  with  respect  to  delegations  of  power  in  external  affairs." 
(343  U.S.  at  636.) 

^  In  1798.  for  example,  Congress  established  a  procedure  for  the  financing  of 
secret  foreign  affairs  operations.  It  enacted  a  statute  providing  for  expenses  of 
"intercourse  or  treaty"  with  foreign  nations.  The  Act  required  the  President  to 
report  all  such  expenditures,  but  granted  him  the  power  to  give  a  certificate  in 
lieu  of  a  report  for  those  payments  the  President  deemed  should  be  kept  secret 
(Act  of  February  9,  1973,  1  Stat.  300. 


36 

The  executive  branch  relies  in  lar^e  part  on  the  President's  own 
constitutional  powers  for  authority  to  conduct  such  covert  action.-*^ 
After  the  failure  of  the  Bay  of  Pigs  operation  in  1961,  the  CIA  asked 
the  Justice  Department  for  an  analysis  of  the  legal  authority  for 
covert  actions.  In  its  response,  the  Justice  Department's  Office  of 
Legislative  Council  stated : 

It  woidd  appear  that  the  executive  branch,  under  the  direction 
of  the  President,  has  been  exercising  without  express  statutory 
authorization  a  function  which  is  within  the  constitutional 
jjowers  of  the  President,  and  that  the  CIA  was  the  agent 
selected  by  the  President  to  carry  out  these  functions.^^ 

The  Justice  Department  memorandum  jiointed  to  the  President's 
foreign  relations  power  and  his  responsibility  for  national  security.-^ 
Ai'guing  by  analogy  from  the  President's  power  as  Commander-in- 
Chief  to  conduct  a  declared  war,  the  memorandum  contended  that 
the  President  could  conduct  jieacetime  covert  actions  involving  armed 
force  without  authority  from  Congress.  The  memorandum  argued 
that  there  was  no  limit  to  the  means  the  President  might  employ  in 
exercising  his  foreign  affairs  i^ower : 

Just  as  "the  power  to  wage  war  is  the  power  to  wage  war 
successfully,"  so  the  power  of  the  President  to  conduct  foreign 
relations  should  be  deemed  to  be  the  power  to  conduct  foreign 
relations  successfully,  hy  any  means  necessary  to  combat  the 
measures  taken  by  the  Communist  bloc,  including  both  open 
and  covert  measures.'^  [Emphasis  added.] 

In  view  of  the  Constitution's  grant  of  concurrent  jurisdiction  to  the 
Congress  in  foreigTi  affairs  and  Congress'  exclusive  constitutional  au- 
thority to  declare  war.  there  is  little  to  support  such  an  extravagant 
claim  of  Presidential  power  in  peacetime.  The  case  which  prompted 
the  Justice  Department's  argument — the  invasion  of  Cuba  at  the  Bay 

-"In  September  19-17,  the  CIA  General  Counsel  expressed  the  opinion  that  activ- 
ity such  as  "black  propaganda,  ranger  and  commando  raids,  behind-the-llnes  sabo- 
tage, and  support  of  guerrilla  warfare"  Avould  constitute  "an  unwarranted  ex- 
tension of  the  functions  authorized"  by  the  19-^7  Act.  (Memorandum  from  the 
CIA  General  Counsel  to  Director,  9/25/-17.)  And.  in  1969.  the  CIA  General  Coun- 
sel wrote  that  the  1947  Act  provided  "rather  doubtful  statutory  authority"  for 
at  least  those  covert  actions — such  as  paramilitary  operations — which  were  not 
related  to  intelligence  gathering.  (Memorandum  from  CIA  General  Counsel  to 
Director,  10/30/69.)  Tlie  Agency's  General  Counsel  took  the  position  that  the 
authority  for  covert  action  rested  on  the  President's  delegation  of  his  own  con- 
stitutional authority  to  CIA  through  various  National  Security  Council  Direc- 
tives. (Ibid.) 

"•  Memorandum,  Office  of  Legislative  Counsel,  Department  of  Justice,  1/17/62, 
p.  11. 

"^  Ihi(J.,  p.  7.  The  memorandum  stated  : 

"Under  modern  conditions  of  'cold  war,'  the  President  can  properly  regard  the 
conduct  of  covert  activities  ...  as  necessary  to  the  effective  and  successful  con- 
duct of  foreign  relations  and  the  protection  of  the  national  security.  When  the 
Ignited  States  is  attacked  from  without  or  within,  the  President  may  'meet  force 
with  force"  ...  In  wagering  a  worldwide  contest  to  strengthen  the  free  nations  and 
contnin  the  Communist  nations,  and  thereby  to  preserve  the  existence  of  the 
I'nited  States,  the  President  should  be  deemed  to  have  comparable  authority  to 
meet  covert  activities  with  covert  activities  if  he  deems  such  action  necessary 
and  consistent  with  our  national  objectives." 

^'^  Ibid. 


37 

of  Pigs — illustrates  the  serious  constitutional  questions  which  arise.  In 
that  operation,  the  President  in  effect  authorized  the  CIA  to  secretly 
direct  and  finance  the  military  invasion  of  a  foreign  coinitry.  This 
action  approaclied,  and  may  have  constituted,  an  act  of  war.  At  the 
least,  it  seriously  risked  placing  the  United  States  in  a  state  of  war 
vis-d-vis  Cuba  on  the  sole  authority  of  the  President.  Absent  the  threat 
of  sudden  attack  or  a  grave  and  immediate  threat  to  the  security  of 
the  country,  only  Congress,  under  the  Constitution,  has  such  authority. 
As  James  Madison  declared.  Congress'  power  to  declare  war  includes 
the  "power  of  judging  the  causes  of  war."  ^^  Madison  wrote: 

Every  just  view  that  can  be  taken  of  the  subject  admonishes 
the  public  of  the  necessity  of  a  rigid  adherence  to  the  simple, 
the  received,  and  tlie  fundamental  doctrine  of  the  constitution, 
that  the  power  to  declare  war,  including  the  power  of  judging 
the  causes  of  war,  is  fullj^  and  exclusively  vested  in  the  legis- 
lature. .  .  ."31 

This  view  was  also  affirmed  by  Hamilton  who,  although  a  principal 
exponent  of  expansive  Presidential  power,  wrote  that  it  is  the 

exclusive  province  of  Congress,  when  the  nation  is  at  peace,  to 
change  that  state  into  a  state  of  war  ...  it  belongs  to  Congress 
only,  to  go  to  war.^^ 

Nor  is  there  much  support  in  historical  practice  prior  to  1950  for  the 
use  of  ai'med  force  to  achieve  foreign  policy  objectives  on  the  sole 
authority  of  the  President.  The  1962  Justice  Department  memorandum 
argued  that  the  practice  of  Presidents  in  using  force  to  protect  Ameri- 
can citizens  and  pi'operty  abroad  was  authority  for  covert  action 
involving  armed  force. ^^  Before  the  post -World  War  II  era,  Presidents 
on  occasion  asserted  their  own  authority  to  use  armed  force  short  of 
war,  but  as  the  Senate  Committee  on  Foreign  Relations  noted  in  19Y3, 
these  operations  were  for  "limited,  minor,  or  essentially  non-political 
purposes."  As  the  Foreign  Eelations  Committee  stated : 

During  the  course  of  the  nineteenth  century  it  became  ac- 
cepted practice,  if  not  strict  constitutional  doctrine,  for  Presi- 
dents acting  on  their  own  authority  to  use  the  armed  forces 
for  such  limited  purposes  as  the  suppression  of  piracy  and  the 
slave  trade,  for  "hot  pursuit"  of  criminals  across  borders,  and 
for  the  protection  of  American  lives  and  property  in  places 
abroad  where  local  govei-nment  was  not  functioning  effec- 
tively. An  informal,  operative  distinction  came  to  be  accepted 
between  the  use  of  the  armed  forces  for  limited,  minor  or 
essentially  nonpolitical  purposes  and  the  use  of  the  armed 
forces  for  "acts  of  war"  in  the  sense  of  large-scale  military 
operations  against  sovereign  states.^* 

That  these  operations  were,  as  the  Committee  on  Foreign  Relations 
noted,  for  "limited,  minor,  or  essentially  non-political  purposes"  is  also 

""Letters  of  Helvidius  (1793),  Madison,  Writinffs,  Vol.  6,  p.  174  (Hunt  ed.). 

''  It)i(I. 

'^Hamilton,  Works,  Vol.  8,  pp.  2-^9-250  (Lodge  ed.) 

'^  Ju.stice  Department  Memorandum,  1/17/62,  p.  2. 

'*  Senate  Report  No.  220,  93d  Cong.,  1st  Sess.  (1973) . 


38 

affirmed  by  the  eminent  authority  on  constitutional  law,  Edward  Cor- 
win.  Prior  to  the  Korean  AYar,  the  "vast  majority"  of  such  cases, 
Corwin  wrote,  "involved  fig^hts  with  pirates,  landin<is  of  small  naval 
contino;ents  on  barbarous  coasts  [to  protect  American  citizens],  the 
dispatch  of  small  bodies  of  troops  to  chase  bandits  or  cattle  rustlers 
across  the  ]\Iexican  border."  ^^ 

To  stretch  the  President's  foreign  relations  power  so  far  as  to  au- 
thorize the  secret  use  of  armed  force  against  foreign  states  without 
congressional  autliorization  or  at  least  "advice  and  consent,"  appears 
to  go  well  beyond  the  proper  scoi)e  of  the  Executive's  power  in  foreign 
affaii's  under  the  Constitution.  Moreover,  where  Congress  is  not  in- 
formed prior  to  the  initiation  of  such  armed  covert  action — as  it  was 
not,  for  example,  in  the  Bay  of  Pigs  operation — the  constitutional  sys- 
tem of  checks  and  balances  can  be  frustrated.  Without  prior  notice, 
thei'e  can  be  no  effective  check  on  the  action  of  the  executive  branch. 
Once  covert  actions  involving  armed  force,  such  as  the  invasion  of 
Cuba  at  the  Bay  of  Pigs  or  paramilitary  operations,  are  begun,  it  may 
be  difficult  if  not  impossible  for  practical  reasons  to  stop  them.  In 
such  circumstances,  covert  action  involving  armed  intervention  in  the 
affairs  of  foreign  states  may  be  inconsistent  with  our  constitutional 
system  and  its  principle  of  checks  and  balances. 

C.  The  CoxsTrruTioxAL  Power  or  Congress  To  Regulate  the 
CoxDUCT  OF  Foreign  Ixtelligence  Activity 

Prior  to  the  1047  National  Security  Act,  Congress  did  not  seek  to 
ex])ressly  authorize  or  regulate  foreign  intelligence  activity  by  statute. 

Congress'  decision  not  to  act,  however,  did  not  reduce  or  eliminate  its 
constitutional  power  to  do  so  in  the  future.  The  Necessary  and  Proper 
Clause  and  its  power  to  "make  rules  for  the  government  and  regula- 
tion" of  the  armed  forces,  along  with  Congress'  general  powers  in 
the  fields  of  foreign  affairs  and  national  defense,  were  always  available. 

In  this  light,  the  question  of  the  legal  authority  for  the  conduct  of 
foreign  intelligence  activity  in  the  absence  of  express  statutory  au- 
thorization can  be  viewed  in  the  manner  set  forth  by  Justice  Jackson 
in  the  Steel  Seizure  case.  He  wrote  : 

When  the  President  acts  in  abpence  of  either  a  congressional 
grant  or  denial  of  authority,  he  can  only  rely  upon  his  own 
independent  powers,  but  there  is  a  zone  of  twilight  in  which 
he  and  Congress  may  have  concurrent  authority,  or  in  which 
its  distribution  is  uncertain.  Therefore,  congressional  inertia, 
indifference  or  quiescence  may  sometimes,  at  least  as  a  prac- 
tical mattei",  enable,  if  not  invite,  measures  on  independent 
Presidential  responsibility.^*^ 

Foreign  intelligence  activity,  particularly  political  covert  action  not 
involving  the  use  of  force,  can  be  seen  as  Iving  in  such  a  "zone  of  twi- 
light" in  which  both  the  Pres'dcnt  and  the  Congress  have  concurrent 
authority  and  responsibilities.  (As  discussed  above,  the  use  of  covert 

■^  Edward  S.  Corwin,  "The  President's  Power,"  in  Haight  and  Johnson,  eds. 
Thr  Pre  Slid  cut's  Role  and  Pmccm,  (19fi5),  p.  361. 

""  Yotmgstnn-n  Co.  v.  Sawyer,  343  U.S.  579,  637  (1952)   (concurring  opinion). 


39 

action  involving  armed  force  raises  serious  constitutional  problems 
where  it  is  not  authorized  by  statute,  particularly  if  Congress  is  not 
informed.)  When  Congress  does  not  act,  the  President  may  in  certain 
circumstances  exercise  authority  on  the  basis  of  his  own  constitutional 
powers. 

Congress  can,  however,  choose  to  exercise  its  legislative  authority 
to  regulate  the  exercise  of  that  authority.  In  view  of  the  President's 
own  constitutional  powers,  Congress  may  not  deprive  the  President  of 
the  function  of  foreign  intelligence.  But,  as  Chief  Justice  Marshall 
stated.  Congress  can  "prescribe  the  mode"  by  which  the  President  car- 
ries out  that  function.  And  the  Congress  may  apply  certain  limits  or 
controls  upon  the  President's  discretion. 

The  Supreme  Court  has  affirmed  this  constitutional  power  of  Con- 
gress. In  Little  v.  Barreme,^''  Chief  Justice  Marshall,  speaking  for  the 
Court,  found  the  seizure  by  the  U.S.  Navy  of  a  ship  departing  a  French 
port  to  be  unlawful,  even  though  the  Nai^  acted  pursuant  to  Presiden- 
tial order.  By  prior  statute.  Congress  had  authorized  the  seizure  of 
ships  by  the  Navy,  but  limited  the  types  of  seizures  that  could  be 
made.  The  President's  orders  to  the  Navy  disregarded  the  limits  set 
out  in  the  law.  If  Congress  had  been  silent.  Chief  Justice  Marshall 
stated,  the  President's  authority  as  Commander-in-Chief  might  have 
been  sufficient  to  permit  the  seizure.  But,  ISIarshall  declai-ed,  once  Con- 
gress had  "prescribed  . .  .  the  manner  in  which  this  law  shall  lie  carried 
into  execution,"  the  President  was  bound  to  respect  the  limitations 
imposed  by  Congress.^* 

There  have  been  at  least  as  many  conceptions  of  the  range  of  the 
President's  own  power  as  there  have  been  holders  of  the  office  of  the 
President.  In  the  case  of  foreign  intelligence  activity.  Justice  Jack- 
son's statement  that  "comprehensive  and  undefined  Presidential  pow- 
ers hold  both  practical  advantages  and  grave  dangers  for  the  coun- 
try" 39  is  particularly  i-elevant,  especiallv  in  view  of  the  tension  be- 
tween the  need  for  secrecy  and  the  constitutional  principle  of  checks 
and  balances.  Yet.  as  Justice  Brandeis  declared,  "checks  and  balances 
were  established  in  order  that  this  should  be  a  government  of  laws  and 
not  of  men."  •*° 

The  1947  National  Securitv  Act  represented  the  exercise  of  Congress' 
constitutional  power  to  order  the  conduct  of  foreign  intelligence  ac- 
tivity under  law.  By  placing  the  autliority  for  foreign  intelligence 
activity  on  a  statutory  base,  Conq-ress  soujrht  to  I'educe  the  reliance  on 
"comprehensive  and  undefined"  Presidential  power  that  had  pre- 
viously been  the  principal  source  of  authority.  However,  tlie  language 
of  the  1947  Act  did  not  expresslv  authorize  the  conduct  of  covert  ac- 
tion and,  as  discussed  earlier.  Congress  apparently  did  not  intend 
to  grant  such  authority.  As  a  result,  inherent  Presidential  DOwer  has 
continued  to  serve  as  the  principal  source  of  authority  for  covert 
action. 

Congress  continued  to  exercise  this  constitutional  power  in  sub- 
sequent legislation.  In  the  Central  Intelligence  Act  of  1949,^^  Congress 


^2Cranchl70  (1805). 

=^2  Cranch  170.  178  (1805). 

^^  Yottngfitown  Co.  v.  Sau-yct\  3^3  U.S.  579.  634  (1952)   (concurring  opinion). 

^''Mijcrs  V.  United  States.  272  U.S.  52,  292  (1926)    (dissenting  opinion). 

"50U.S.C.403a-403j. 


40 

set  out  the  administrative  procedures  governing  CIA  activities.  The 
1949  Act  regulated  the  CIA's  acquisition  of  material,  the  hiring  of  per- 
sonnel and  its  accounting  for  funds  expended. 

In  1974,  Congress  imposed  a  reporting  requirement  for  the  conduct 
of  certain  foreign  intelligence  activities.  In  an  amendment  to  the 
Foreign  Assistance  Act,*^  Congress  provided  that  no  funds  may  be 
expended  by  or  on  behalf  of  the  CIA  for  operations  abroad  "other 
than  activities  intended  solely  for  obtaining  necessary  intelligence" 
unless  two  conditions  were  met :  a)  the  President  must  make  a  finding 
that  "each  such  operation  is  important  to  the  national  security  of  the 
United  States",  and  b)  the  President  must  report  "in  a  timely  fashion" 
a  description  of  such  operation  and  its  scope  to  congressional 
committees.*^ 

In  short,  the  Constitution  provides  for  a  system  of  checks  and  bal- 
ances and  interdependent  power  as  between  the  Congress  and  the  ex- 
ecutive branch  with  resj^ect  to  foreign  intelligence  activity.  Congress, 
with  its  responsibility  for  the  purse  and  as  the  holder  of  the  legisla- 
tive power,  has  the  constitutional  authority  to  regulate  the  conduct 
of  foreign  intelligence  activity. 


*^22U.S.C.  2422. 

"  Ibid. 


IV.  THE  PRESIDENT'S  OFFICE 

Intelligence  has  been  the  province  of  the  President.  It  has  informed 
his  decisions  and  furthered  his  purposes.  Intelligence  information  has 
been  seen  as  largely  belonging  to  the  President,  as  being  his  to  classify 
or  declassify,  his  to  withhold  or  share.  The  instruments  of  U.S.  intel- 
ligence have  been  the  Presidents'  to  use  and  sometimes  to  abuse. 

The  President  is  the  only  elected  official  in  the  chain  of  command 
over  the  United  States  intelligence  community.  It  is  to  him  the  Con- 
stitution and  the  Congress  have  granted  authority  to  carry  out  intelli- 
gence activities.  It  is  the  President  who  is  ultimately  accountable  to 
the  Congress  and  the  American  people. 

The  Committee  focused  its  investigation  on  the  instruments  avail- 
able to  the  President  to  control,  direct,  and  supervise  the  U.S.  intelli- 
gence community.  As  the  result  of  controversy  as  to  whether  the  intel- 
ligence community  has  been  "out  of  control,"  Senate  Resolution  21 
directed  the  Committee  to  determine  the  "nature  and  extent  of  execu- 
tive branch  oversight  of  all  United  States  intelligence  activities." 

This  involves  three  Presidential  instrumentalities :  ^ 

— The  National  Security  Council ; 

— The  Office  of  Management  and  Budget ; 

— The  President's  Foreign  Intelligence  Advisory  Board. 

The  Committee  sought  to  establish  whether  these  mechanisms,  as 
they  have  evolved,  provide  effective  control  over  the  entire  range  of 
U.S.  intelligence  activities.  Particular  attention  was  given  to  the  sub- 
ject of  covert  action,  in  part  because  it  has  been  a  major  object  of 
presidential-level  review.  In  addition,  the  Committee  considered 
the  adequacy  of  high-level  supervision  of  espionage,  counterintelli- 
gence, and  the  overall  management  of  the  U.S.  intelligence  community. 
For  the  first  time  in  the  history  of  congressional  oversight,  the  Com- 
mittee had  access  to  records  of  the  proceedings  of  the  National  Secu- 
rity Council  and  its  subcommittees.  It  reviewed  the  NSC  directives 
related  to  intellierence  and  the  files  of  other  agencies'  participation  in 
the  NSC's  intelligence-related  activities.  The  Committee  conducted 
extensive  interviews  with  current  and  former  White  House,  NSC,  and 
cabinet-level  officials  dealing  with  intellip-ence  matters.  It  took  sworn 
testimony  on  these  is<^ues  from  a  number  of  them,  including  the  present 
Secretary  of  State.  Officials  of  the  Office  of  Management  and  Budget 
and  former  members  and  staff  of  the  President's  Foreign  Intelligence 
Advisory  Board  were  also  interviewed. 

This  report  presents  the  results  of  that  investigation  and  the  Com- 
mittee's findings  with  respect  to  the  central  question  of  Presidential 
accountability  and  control  of  the  foreign  intelligence  activities  of  the 
Ignited  States  Government. 


^  A  fourth  instrumentality  has  been  established  as  a  result  of  President  Ford's 
February  17,  ]{>76,  reorsranization  of  the  foreisrn  intelligence  community.  Execu- 
tive Order  11905  created  the  Intelligence  Oversight  Board. 

(41) 


42 

A.  The  National  Security  Council 

1.  Overview 

The  National  Security  Council  was  created  by  the  National  Security 
Act  of  1947.  According  to  the  Act,  the  NSC  is  "to  advise  the  President 
with  respect  to  the  integration  of  domestic,  foreign,  and  military  poli- 
cies relating  to  national  security"  and  "assess  and  appraise  the  objec- 
tives, commitments,  and  risks  of  the  United  States  in  relation  to  our 
actual  and  potential  military  power."  Over  the  years,  the  principal 
functions  of  the  NSC  have  been  in  the  field  of  policy  formulation  and 
the  coordination  and  monitoring  of  overseas  operations.  Among  its 
responsibilities,  the  NSC  has  provided  policy  guidance  and  direction 
for  United  States  intelligence  activities. 

The  National  Security  Council  is  an  extremely  flexible  instrument. 
It  has  only  four  statutory  members :  the  President,  the  Vice  President, 
and  the  Secretaries  of  State  and  Defense.  At  the  discretion  of  the 
President,  others  may  be  added  to  the  list  of  attendees ;  NSC  subcom- 
mittees may  be  created  or  abolished,  and  the  NSC  staff  given  great 
power  or  allowed  to  wither. 

Thus,  the  operation  of  the  NSC  has  reflected  the  personal  style  of 
each  President.  The  Council's  role  and  responsibilities  have  varied  ac- 
cording to  personalities,  changing  policies  and  special  circumstances. 
Presidents  Truman,  Kennedy  and  Johnson  found  a  loose  and  informal 
NSC  structure  to  their  liking.  Others  have  set  up  more  formal  and 
elaborate  structures— President  Eisenhower's  NSC  system  is  the  best 
example.^  At  times,  particularly  during  crises.  Presidents  have  by- 
passed the  formal  NSC  mechanisms.  President  Kennedy  set  up  an 
Executive  Committee  (EXCOM)  to  deal  with  the  Cuban  Missile 
Crisis;  President  Johnson  had  his  Tuesday  Lunch  group  to  discuss 
Viet  Nam  and  other  high  level  concerns.  As  a  result,  over  the  years  the 
NSC  has  undergone  major  changes,  from  the  elaborate  Planning 
Board/Operations  Coordination  Board  structure  under  Eisenhower  to 
its  dismantlement  by  Kennedy  and  the  creation  of  a  centralized  system 
of  NSC  subcommittees  under  President  Nixon  and  his  Assistant 
for  National  Security  Affairs,  Dr.  Kissinger. 

Today,  in  addition  to  the  four  statutory  members,  the  National 
Security  Council  is  attended  by  the  Director  of  Central  Intelligence 
(DCI)  and  the  Chairman  of  the  Joint  Chiefs  of  Staff  as  advisers. 
From  time  to  time,  others,  such  as  the  Director  of  the  Arms  Control 
and  Disarmament  Agency,  also  attend. 

Prior  to  President  Ford's  reorganization,  the  NSC  was  served  by 
seven  principal  committees:  the  Senior  Review  Group,  the  Under 
Secretary's  Committee,  the  Verification  Panel,  the  Washington  Spe- 
cial Actions  Group  (WSAG),  the  Defense  Program  Eeview  Commit- 
tee, the  40  Committee,  and  the  National  Security  Council  Intelligence 


^  For  a  full  treatment  of  the  evolu«^inn  of  the  National  Secnrity  Council  and  its 
place  within  the  national  security  decisionmnking  process,  see  Keith  C'ark  and 
Laurence  Legere.  Tlie  President  and  the  Management  of  National  Security 
(1969)  ;  Stanley  Falk  and  Theodore  Bauer,  National  Serurity  Managemeyit:  The 
NationM  Security  Structure  (1972)  ;  and  Inquiries  of  the  Subcommittee  on  Na- 
tional Policy  Machinery  for  the  Senate  Committee  on  Government  Operations, 
Organizing  for  National  Security  (1961) . 


43 

Committee  (NSCIC).^  The  latter  two  committees  had  direct  intelli- 
gence responsibilities.  The  40  Committee  has  now  been  replaced  by  the 
Operations  Advisory  Group.  No  successor  for  NSCIC  has  been  des- 
ignated. The  current  NSC  structure  is  shown  below. 


iMATIONAL  SECURITY  COUNCIL 
•  President  •Vice  President  •  Secretary  of  State         •  Secretary  of  Defense 

•  Chairman,  Joint  Chiefs  of  Staff  •  Director  of  Centrallntelligence 


White  Hous 
Situation  Ro( 


Asst.  to  Pres,  for  Nat'l 
Sec.  Affairs 


UNDER  SECRETARIES 
COMMITTEE 

•  n.'i 

■i-r.  „!  Sut»  ICh,..„l     1 

•  Asil  ■■!  Pr-,-,  toi  rjol  1 
SfC  Aff.i,rs 

•  Dm 

S-.-C  o(  D.:f0Mit. 

•Clij 

-n:jn.  JCS 

•DCI 

SENIOR  REVIEW  GROUP 


•  Asst  to  Prt?s  for  Ndt'l 

Sue  Atlairs  IChn.nl 

•  Di'p  Sue  ol  Stdle 

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Each  of  the  current  NSC  subcommittees  are  "consumers"  of  the 
intelligence  community  product.  The  DCI  sits  on  all  of  them.  In  most 
cases,  the  DCI  briefs  the  subcommittees  and  the  full  NSC  before 
agenda  items  are  considered.  CIA  representatives  sit  on  working  and 
ad  hoc  groups  of  the  various  subcommittees.  The  CIA's  Area  Division 
Chiefs  are  the  Agency's  representatives  on  the  NSC  Interdepartmental 
Groups  (IGs).*  In  all  of  these  meetings  there  is  a  constant  give  and 
take.  Policymakers  are  briefed  on  current  intelligence  and  they,  in 
turn,  levy  intelligence  priorities  on  the  CIA's  representatives. 

^The  Senior  Review  Group,  under  the  direction  of  the  President's  As- 
sistant for  National  Security  Affairs  defines  NSC  issues;  determines  whether 
alternatives,  costs,  and  consequences  have  been  fully  considered ;  and  forwards 
recommendations  to  the  full  Council  and/or  the  President.  The  Under  Secretaries 
Committee  seeks  to  ensure  effective  implementation  of  NSC  decisions.  The  Veri- 
fication Panel  monitors  arms  control  agreements  and  advises  on  SALT  and 
MBFR  negotiations.  WASG  coordinates  activities  during  times  of  crises,  such  as 
the  Middle  East  and  Southeast  Asia.  The  Defense  Program  Review  Committee, 
now  nearly  defunct,  assesses  the  political,  military  and  economic  implications  of 
defense  policies  and  programs. 

*NSC  Interdepartmental  Groups  (IGs)  are  made  up  of  representatives  from 
State,  Defense,  CIA,  the  Joint  Chiefs  of  Staff  and  the  National  Security  Council. 
IGs  are  chaired  by  the  State  representative,  an  Assistant  Secretary,  aed  they 
prepare  working  papers  for  the  Senior  Review  Group. 


44 

£:  The  NSO  and  Intelligence 

The  1947  National  Security  Act  established  the  CIA  as  well  as  the 
NSC.  The  Act  provided  that  the  CIA  was  "established  under  the 
National  Security  Council"  and  was  to  carry  out  its  prescribed  func- 
tions "under  the  direction  of  the  National  Security  Council."  Five 
broad  functions  were  assi^ed  to  the  CIA : 

(1)  to  advise  the  National  Security  Council  in  matters 
concerning  such  intelligence  activities  of  the  Government  de- 
partments and  agencies  as  relate  to  national  security. 

(2)  to  make  recommiendations  to  the  National  Security 
Council  for  the  coordination  of  such  intelligence  activities  of 
the  departments  and  agencies  of  the  Government  as  relate 
to  the  national  security ; 

(3)  to  correlate  and  evaluate  intelligence  relating  to  the 
national  security,  and  provide  for  the  appropriate  dissemina- 
tion of  such  intelligence  within  the  Government  using  where 
appropriate  existing  agencies  and  facilities. 

(4)  to  perform.,  for  the  benefit  of  the  existing  intelligence 
agencies,  such  additional  services  of  coTnmon  concern  as  the 
National  Security  Council  determines  can  be  more  efficiently 
accomplished  centrally. 

(5)  to  perfoTTYh  such  other  functions  and  duties  related  to 
intelligence  affecting  the  national  security  as  the  National 
Security  Council  may  from  time  to  time  direct. 

The  Director  of  Central  Intelligence  is  responsible  for  seeing  that 
these  functions  are  performed,  and  is  to  serve  as  the  President's 
principal  foreign  intelligence  officer. 

The  NSC  sets  overall  policy  for  the  intelligence  community.  It  does 
not,  however,  involve  itself  in  day-to-day  management  activities.  The 
task  of  coordinating  intelligence  community  activities  has  been  dele- 
gated to  the  DCI,  who,  until  President  Ford's  reorganization,  sought 
to  accomplish  it  through  the  United  States  Intelligence  Board 
(USIB).  USIB  was  served  by  15  inter-agency  committees  and  a  vari- 
ety of  ad  hoc  groups.  It  provided  guidance  to  the  intelligence  commu- 
nity on  requirements  and  priorities,  coordinated  community  activities 
and  issued,  through  the  DCI,  National  Intelligence  Estimates  (NIEs) . 
The  DCI  was  also  assisted  by  the  Intelligence  Resources  Advisory 
Committee  (IRAC).  IRAC  assisted  the  DCI  in  the  preparation  of 
a  consolidated  intelligence  budget  and  sought  to  assure  that  intelligence 
resources  were  being  used  efficiently. 

As  a  result  of  President  Ford's  Executive  Order,  management  of  the 
intelligence  community  will  now  be  vested  in  the  Committee  on  Foreign 
Intelligence  (CFI).  USIB  and  IRAC  are  abolished.  Membership  on 
the  new  committee  will  include  the  DCI,  as  Chairman,  the  Deputy 
Secretary  of  Defense  for  Intelligence  and  the  Deputy  Assistant  to 
the  President  for  National  Security  Affairs.  Staff  support  will 
be  provided  bv  the  DCI's  Intelligence  Community  (IC)  staff.  The  new 
committee  will  reDoi-t  directly  to  the  NSC. 

The  CFI  will  have  far-ranging  responsibilities.  It  will  oversea  the 
budget  and  resources,  as  well  as  establish  management  policies,  for  the 
CIA,  the  National  Security  Agency,  the  Defense  Intelligence  Agency, 


45 

and  United  States  reconnaissance  programs.  Further,  it  will  establish 
policy  priorities  for  the  collection  and  production  of  national  intel- 
ligence. The  DCI  will  be  responsible  for  producing  national  intelli- 
gence, including  NIEs.  To  assist  him  in  this  task,  the  DCI  will  set  up 
whatever  boards  and  committees  (similar  to  the  now  defunct  USIB) 
are  necessary. 

The  President's  Executive  Order  also  directed  the  NSC  to  review, 
on  a  semi-annual  basis,  certain  foreign  intelligence  activities.  Prepared 
by  the  President's  Assistant  for  National  Security  Affairs,  these  re- 
views will  focus  on  the  quality,  scope  and  timeliness  of  the  intelligence 
product;  the  responsiveness  of  the  intelligence  community  to  policy- 
makers' needs;  the  allocation  of  intelligence  collection  resources;  and 
the  continued  appropriateness  of  ongoing  covert  operations  and  sensi- 
tive intelligence  collection  missions. 

One  of  the  functions  the  NSC  has  assigned  to  the  CIA  is  the  con- 
duct of  foreign  covert  operations.  These  operations  began  in  1948  and 
have  continued  to  the  present,  uninterinipted.  Authority  to  conduct 
covert  operations  has  usually  been  ascribed  to  the  "such  other  functions 
and  duties"  provision  of  the  1947  Act.^ 

The  NSC  uses  National  Security  Council  Intelligence  Directives 
(NSCIDs)  to  set  policy  for  the  CIA  and  the  intelligence  community. 
NSCIDs  are  broad  delegations  of  responsibility,  issued  under  the  au- 
thority of  the  1947  Act.'  They  may  assign  duties  not  explicitly  stated 
in  the  1947  Act  to  the  CIA  or  other  intelligence  departments  or  agen- 
cies. NSCIDs,  souietimes  referred  to  by  critics  as  the  intelligence  com- 
munity's "secret  charter,"  are  executive  directives  and,  therefore,  not 
subject  to  congfressional  review.  ITntil  recently,  Congress  has  not  seen 
the  various  NSCIDs  issued  by  the  NSC. 

S.  Overvieio:  Jfi  Committee  and  NSC  10 

Prior  to  President  Ford's  reorganization,  two  NSC  committees,  the 
40  Committee  and  the  National  Securitv  Council  Intelligence  Com- 
mittee, had  special  intelligence  duties.  Their  functions  and  respon- 
sibilities will  be  discussed  in  turn. 

Throughout  its  history,  the  40  Committee  and  its  direct  predeces- 
sors—the 303  Committee,  the  5412  or  Special  Group,  the  10/5  and  10/2 
Panels — have  been  charged  by  various  NSC  directives  with  exercising 
political  control  over  foreign  covert  operations.'^  Now  this  task  will 
be  the  responsibility  of  the  Operations  Advisory  Group.  The  Com- 
mittees  have   considered    the  objectives  of    any    proposed    activity, 


^  Three  iwssible  legal  bases  for  covert  operations  are  most  often  cited :  the 
National  Security  Act  of  1947,  the  "inherent  powers"  of  the  President  in  foreign 
affairs  and  as  Commander-in-Chief,  and  the  Foreign  Assistance  Act  of  1974.  Con- 
gressional acquiescence  and  ratification  through  the  appropriations  process  is  a 
fourth  possibility.  See  Aopendix  I  of  this  report  for  a  full  discussion. 

'  For  example,  NSCIDs  are  used  to  spell  out  the  duties  and  responsibilities  of 
the  DCI,  the  coordination  of  covert  intelligence  collectir>n  activities,  and  the  pro- 
duction and  dissemination  of  the  intelligence  commiinity  product. 

'  Covert  operations  encompass  a  wide  ransre  of  programs.  These  include  politi- 
cal and  propaganda  programs  designed  to  influence  or  support  foreign  political 
parties,  groups,  and  specific  political  and  military  leaders ;  economic  action  pro- 
grams ;  paramilitary  operations ;  and  some  coimterinsurgency  programs.  Human 
intelligence  collection,  or  spying,  and  counterespionage  programs  are  not  included 
under  the  rubric  of  covert  operations. 


46 

whether  the  activity  Avould  accomplish  those  aims,  how  likely  it  would 
be  to  succeed,  and  in  general  whether  the  activity  would  be  in  the 
American  interest.  In  addition,  the  Committees  have  attempted  to 
insure  that  covert  operations  were  framed  in  such  a  way  that  they 
later  could  be  "disavowed"  or  "plausibly  denied"  by  the  United  States 
Government.  President  Ford's  Executive  Order  included  the  con- 
cept of  "plausible  denial."  Using  the  euphemism  "special  activities" 
to  describe  covert  operations,  the  Order  stated : 

Special  activities  in  support  of  national  foreign  policy  ob- 
jectives [are  those]  activities  .  .  .  designed  to  further  of- 
ficial United  States  programs  and  policies  abroad  which 
are  planned  and  executed  so  that  the  role  of  the  United  States 
Government  is  not  apparent  or  publicly  acknowledged.^'^ 

The  concept  of  "plausible  denial"  is  intended  not  only  to  hide  the 
hand  of  the  United  States  Government,  but  to  protect  the  President 
from  the  embarrassment  of  a  "blown"  covert  operation.  In  the  words 
of  former  CIA  Director  Richard  Helms : 

.  .  .  [the]  Special  Group  was  the  mechanism  .  .  .  set  up  .  .  . 
to  use  as  a  circuit-breaker  so  that  these  things  did  not  ex- 
plode in  the  President's  face  and  so  that  he  was  not  held  re- 
sponsible for  them.^'' 
In  the  past,  it  appears  that  one  means  of  protecting  the  President 
from  embarrassment  was  not  to  tell  him  about  certain  covert  opera- 
tions, at  least  formally.  According  to  Bromley  Smith,  an  official  who 
served  on  the  National  Security  Council  staff  from  1958  to  1969,  the 
concept  of  "plausible  denial"  was  taken  in  an  almost  literal  sense: 
"The  government  was  authorized  to  do  certain  things  that  the  Presi- 
dent was  not  advised  of."  ""^  According  to  Secretary  of  State  Kissinger, 
however,  this  practice  was  not  followed  during  the  Nixon  Administra- 
tion and  he  doubted  it  ever  was.  In  an  exchange  with  a  member  of 
the  House  Select  Committee  on  Intelligence,  Secretary  Kissinger 
stated : 

Mr.  Kasten".  Mr.  Secretary,  you  said  that  the  President 
personally,  directly  approved  all  of  the  covert  operations  dur- 
ing that  period  of  time  [1972  to  1974]  and,  in  your  knowl- 
edge, during  all  periods  of  time.  Is  that  correct  ? 

Secretary  Kissinger.  I  can  say  with  certainty  during  the 
period  of  time  that  I  have  been  in  Washington  and  to  my  al- 
most certain  knowledge  at  every  period  of  time,  yes.^ 

Four  senior  officials  who  deal  almost  exclusively  with  foreign  affairs 
have  been  central  to  each  of  the  sequence  of  committees  charged  w^ith 
considering  covert  operations:  The  President's  Assistant  for  National 
Security  Affairs,  the  Deputy  Secretary  of  Defense,  the  Under  Secre- 
tary of  State  for  Political  Affairs  (formerly  the  Deputy  Under  Secre- 
tary), and  the  Director  of  Central  In'tellijxence.  These  four  officials, 
plus  the  Chairman  of  the  Joint  Chiefs  of  Staff,  made  up  the  40  Com- 


^^  Executive  Order  No.  11905,  2/18/76. 
^''  Richard  Helms  testimony.  6/13/75,  pp.  28-29. 
"""  Staff  summary  of  Bromley  Smith  interview,  .5/5/75. 

*  Henry  Kissinger  testimony,  House  Select  Committee  on  Intelligence,  Hear- 
ings, 10/31/75,  p.  3341. 


47 

mittee.  At  certain  times  the  Attorney  General  also  sait  on  the  Commit- 
tee. President  Ford's  reor^^fanization  Avill  si^nificantlv  alter  this  mem- 
bership. The  new  Opei-ations  AdA^isoiy  Gronp  will  consist  of  the 
President's  Assisifant  for  National  Secni-itv  Affairs,  the  Secretaries  of 
State  and  Defense,  the  Chairman  of  the  JCS,  and  the  DCI.  The 
Attorney  General  and  the  Director  of  OMB  will  attend  meetings  as 
observei-s.  Tlie  Chaii-man  of  tlie  Group  will  be  desifjnated  by  the 
President.  Staff  supj)orl:  will  be  provided  by  the  NSC  staff. 

The  formal  composition  of  the  Operations  Gronp  breaks  with 
tradition.  The  Secretai-ies  of  State  and  Defense  will  now  be  pait  of 
the  approval  process  for  covert  opera^^ions,  rather  than  the  Under 
Secretary  of  State  for  Political  Affairs  and  Deputy  Secretary  of 
Defense.  The  Operations  Advisory  Group  appears  to  be,  therefore,  an 
up-(^raded  40  Committee.  Whether  this  proves  to  be  the  case  remains  to 
be  seen.  Presidenit  Ford's  Executive  Order  contained  a  provision, 
Section  3(c)  (3),  wliich  allows  (rroup  members  to  send  a  "designated 
representative"  to  meetings  in  "unusual  circumstances." 

The  National  Security  Council  Intelligence  Committee  (NSCIC) 
was  established  in  November  1971  as  pait  of  a  far-reaching  reorgani- 
zation of  the  intelligence  community  ordered  by  President  Nixon.^ 
The  Presidential  directive  stated  : 

The  Committee  will  give  direction  and  guidance  on  national 
intelligence  needs  and  piT>vide  for  a  continuing  evaluation  of 
intelligence  products  from  the  viewpoint  of  the  intelligence 
user. 

One  reason  cited  for  creating  NSCIC  was  a  desire  to  make  the 
intelligence  community  more  i-esponsive  to  the  needs  of  policy  makers. 
According  to  a  news  report  at  the  time : 

"The  President  and  Henry  [Kissinger]  have  felt  that  the 
intelligence  we  were  collectinji-  wasn't  alwavs  responsive  to 
their  needs,"  said  one  source.  "They  suspected  that  one  reason 
was  because  the  intelligence  community  had  no  way  of  know- 
ing day  to  day  what  the  President  and  Kissinger  needed. 
This  is  a  new  link  Ix^tween  producers  and  consumers.  We'll 
have  to  wait  and  see  if  it  works."  ^° 

Prior  to  NSCIC  no  formal  structure  existed  for  addressing  the 
major  questions  concerning  intelligence  priorities  rather  than  specific 
operations:  Do  "producers"  in  the  intelligence  community  perform 
analyses  which  are  useful  to  "consumers" — the  policymakers  at  var- 
ious levels  of  government;  are  intelligence  resources  allocated  wisely 


®  For  over  a  year,  the  intelligence  community  had  been  under  study  by  the 
Office  of  Management  and  Budget,  then  headed  by  Tames  Schlesinger.  In  addi- 
tion to  NSCIC.  the  President's  reorganization  included  an  enhanced  leadership 
role  for  the  DCI,  the  establishment  of  a  Net  Assessment  Group  within  the 
NSC  staff,  the  creation  of  an  Intellisrence  Resources  Advisory  Committee 
(IRAC),  and  a  reconstitution  of  the  United  States  Intelligence  Board  (USIB). 
The  Net  Assessment  Group  was  headed  by  a  senior  NSC  staff  member  and  was 
responsible  for  reviewing  and  evaluating  all  intelligence  products  and  for 
producing  net  assessments.  When  .Tames  STchlesinger  was  na'med  Secretary  of 
Defense  in  Tune.  1973.  the  NSC  Net  Assessment  Group  was  abolished.  Its  staff 
member  joined  Schlesinger  at  the  Defense  Department  and  set  up  a  similar  office. 

^'"Helms  Told  to  Cut  Global  Expenses,"  New  York  Times,  11/7/71,  p.  55. 


48 

among  agencies  and  types  of  collection  ?  NSCIC  was  a  structural  re- 
sponse to  these  issues  as  well  as  part  of  the  general  tendency  at  that 
time  to  centralize  a  greater  measure  of  control  in  the  White  House  for 
national  security  affairs. 

NSCIC's  mission  was  to  give  direction  and  policy  guidance  to  the 
intelligence  community.  It  was  not,  and  was  not  intended  to  be,  a  chan- 
nel for  transmitting  substantive  intelligence  from  the  intelligence 
community  to  policymakers  nor  for  levying  specific  requirements  in 
the  opposite  direction.  Neither  was  NSCIC  involved  in  the  process  of 
allocating  intelligence  resources.  Its  membership  included  the  Assist- 
ant to  the  President  for  National  Security  Affairs,  who  chaired  the 
Committee,  the  DCI,  the  Deputy  Secretaries  of  State  and  Defense, 
the  Chairman  of  the  JCS,  and  the  Under  Secretary  of  the  Treasury 
for  Monetaiy  Affairs. 

NSCIC  was  abolished  by  Executive  Order  11905.  No  successor  body 
was  created.  The  task  of  providing  policy  guidance  and  direction  to 
the  intelligence  community  now  falls  to  the  Committee  on  Foreign 
Intelligence.  According  to  the  President's  Executive  Order,  the  CFI 
will  "establish  policy  priorities  for  the  collection  and  production  of 
national  intelligence."  In  addition,  the  full  NSC  is  now  required  to 
conduct  policy  reviews  twice  a  year  on  the  quality,  scope  and  timeliness 
of  intelligence  and  on  the  responsiveness  of  the  intelligence  commu- 
nity to  the  needs  of  policymakers. 

B.  Authorization  and  Control  or  Covert  AcrnvrnES 

1.  The  NSC  and  Covert  Activities:  History 

President  Ford's  Operations  Advisory  Group  is  the  most  recent  in  a 
long  line  of  executive  committees  set  up  to  oversee  CIA  covert  activi- 
ties. These  committees  and  CIA  covert  activities  can  be  traced  back  to 
NSC-4-A,  a  National  Security  Council  directive  issued  in  December 
1947. 

In  1947  the  United  States  was  engaged  in  a  new  struggle,  the  Cold 
War.  To  resist  Communist-backed  civil  war  in  Greece,  the  Truman 
Doctrine  was  proclaimed.  The  Marshall  Plan  was  about  to  begin. 
Within  three  years  China  would  "fall,"  the  Korean  War  would  begin, 
and  the  Soviet  Union  would  acquire  an  atomic  capability.  The  Cold 
War  was  being  fought  on  two  fronts — one  overt,  the  other  covert. 
The  Soviet  clandestine  services,  then  known  as  the  NKVD  (now  the 
KGB),  were  engaged  in  espionage  and  subvereive  activities  through- 
out the  world.  France  and  Italy  were  beleaguered  by  a  wave  of  Com- 
munist-inspired strikes.  In  Februai-y  1948,  the  Communists  staged  a 
successful  coup  in  Czechoslovakia.  The  Philippines  government  was 
under  attack  by  the  Hukbalahaps,  a  Communist-led  guerrilla  group. 
In  that  climate,  and  in  response  to  it,  a  broad  range  of  United  States 
covert  activities  were  begun.  They  were  intended  to  supplement  not 
replace,  overt  U.S.  activities,  such  as  the  Marshall  Plan. 

In  December  1947,  the  Department  of  State  advised  the  National 
Security  Council  that  covert  operations  mounted  by  the  Soviet  Union 
threatened  the  defeat  of  American  objectives  and  recommended  that 
the  United  States  supplement  its  own  overt  foreign  policy  activities 
with  covert  operations.  At  the  Council's  first  meeting,  021  December  19, 
1947,  it  approved  NSC-4,  entitled  "Coordination  of  Foreign  Intelli- 


49 

gence  Information  Measures."  This  directive  empowered  the  Secretary 
of  State  to  coordinate  overseas  information  activities  designed  to 
counter  communism.  A  top  secret  annex  to  NSC-4 — NSC-4-A — in- 
structed the  Director  of  Central  Intelligence  to  undertake  covert  psy- 
chological activities  in  pursuit  of  the  aims  set  forth  in  NSC-4.  The 
initial  authority  given  the  CIA  for  covert  operations  under  NSC-4-A 
did  not  establish  formal  procedures  for  either  coordinating  or  approv- 
ing these  operations.  It  simply  directed  the  DCI  to  undertake  covert 
action  and  to  ensure,  through  liaison  with  State  and  Defense,  that 
the  resulting  operations  were  consistent  with  American  policy.  In 
1948,  an  independent  CIA  office — the  Office  of  Policy  Coordination 
(OPC) — was  established  to  carry  out  the  covert  mission  assigned  by 
the  NSC.  NSC-4— A  was  the  President's  first  formal  authorization 
for  covert  operations  in  the  postwar  period,"  and  it  was  used  to  un- 
dertake covert  attempts  to  influence  the  outcome  of  the  1948  Italian 
national  elections. 

Over  the  next  seven  years,  from  June  1948  to  March  1955,  a  series 
of  National  Security  Council  directives  was  issued.  Each  was  ad- 
dressed, in  part,  to  the  review  and  control  of  CIA  covert  activities. 
NSC  10/2  superseded  NS'C-4-A  on  June  18, 1948,  and  a  "10/2  Panel," 
the  first  predecessor  of  today's  Operations  Advisory  Group,  was  es- 
tablished. The  panel  was  to  review,  but  not  approve,  covert  action 
proposals.  The  1948  directive  was  superseded  by  NSC  10/5  on  Octo- 
ber 23,  1951.  This  directive  authorized  an  expansion  of  world-wide 
covert  operations  ^^  and  altered  policy  coordination  procedures.^^ 

Throughout  this  period,  NSC  directives  provided  for  consultation 
with  representatives  of  State  and  Defense,  but  these  representatives 
had  no  approval  function.  There  was  no  formal  procedure  or  com- 
mittee to  consider  and  approve  projects.  Nor  was  a  representative  of 
the  President  consulted.  From  1949  to  1952,  the  DCI  approved  CIA 
covert  action  projects  on  his  own  authority;"  from  1953  to  March 
1955  the  DCI  coordinated  project  approvals  with  the  Psychological 

"  Covert  operations  were  carried  out  by  the  OflBce  of  Strategic  Services  (OSS) 
during  the  Second  World  War.  OSS  was  disbanded  on  October  1,  1945.  Three 
months  later,  on  January  22,  1946,  President  Truman  issued  an  Executive  Order 
creating  the  Central  Intelligence  Group  (CIG).  CIG  was  the  direct  predecessor 
of  the  CIA.  It  operated  under  an  executive  council,  the  National  Intelligence 
Agency  (NIA).  Although  a  psychological  warfare  capability  existed  within 
CIG,  it  did  not  engage  in  any  covert  operations  during  its  existence.  CIG  and 
NIA  were  dissolved  with  the  passage  of  the  1947  National  Security  Act. 

^^  Prior  to  this  time  CIA  covert  operations  were  largely  confined  to  psycho- 
logical warfare,  and  almost  all  were  media-related.  These  activities  included  the 
use  of  false  publications,  "black"  radio,  and  subsidies  to  publications.  With  the 
issuance  of  NSC  10/2,  three  other  categories  of  covert  actixity  were  added  to 
the  psychological  warfare  mission :  political  warfare,  economic  warfare  and 
preventive  direct  action  (e.g.,  support  for  guerrillas,  sabotage  and  front 
organizations ) . 

"At  this  same  time,  the  OflSce  of  Policy  Coordination  (OPC)  was  merged 
with  the  CIA's  OflBce  of  Special  Operations  which  was  responsible  for  espionage. 
The  CIA's  Clandestine  Service  was  now  in  place. 

"  The  DCI  did,  however,  undertake  external  coordination  of  covert  action 
programs.  Under  NSC  10/2,  the  executive  coordination  group — the  10/2  Panel — 
met  regularly  with  the  CIA's  Assistant  Director  for  Policy  Coordination  to  plan 
and  review  covert  action  programs.  This  procedure  continued  under  the  10/5 
Panel. 


50 

Strategy  Board  or  the  Operations  Coordination  Board.^^  Certain 
covert  activities  were  brought  to  the  President's  attention  at  the  DCI's 
initiative. 

By  the  mid-1950s  covert  action  operations  were  no  longer  an  ad  hoc 
response  to  specific  threats.  They  had  become  an  institutional  part  of 
the  "protracted  conflict"  with  the  Soviet  Union  and  Communism.  In 
September  1954,  a  Top  Secret  report  on  CIA  covert  activities,  prepared 
in  connection  with  the  second  Hoover  Commission,  was  submitted  to 
President  Eisenhower.  The  introduction  to  that  report  is  enlightening 
for  what  it  said  about  how  covert  operations  were  viewed  at  that  time, 
as  well  as  the  rationale  for  them. 

As  long  as  it  remains  national  policy,  another  important 
requirement  is  an  aggressive  covert  psychological,  political 
and  paramilitary  organization  more  effective,  more  unique, 
and  if  necessary,  more  ruthless  than  that  employed  by  the 
enemy.  No  one  should  be  permitted  to  stand  in  the  way  of  the 
prompt,  efficient,  and  secure  accomplishment  of  this  mission. 

It  is  now  clear  that  we  are  facing  an  implacable  enemy 
whose  avowed  objective  is  world  domination  by  whatever 
means  and  at  whatever  cost.  There  are  no  rules  in  such  a  game. 
Hitherto  acceptable  norms  of  human  conduct  do  not  apply. 
If  the  U.S.  is  to  survive,  longstanding  American  concepts  of 
"fair  play"  must  be  reconsidered.  We  must  develop  effective 
espionage  and  counterespionage  services  and  must  learn  to 
subvert,  sabotage,  and  destroy  our  enemies  by  more  clever, 
more  sophisticated,  and  more  effective  methods  than  those 
used  against  us.  It  may  become  necessary  that  the  American 
people  be  made  acquainted  with,  understand  and  support  this 
fundamentally  repugnant  philosophy. 

Two  significant  NSC  directives  on  covert  activities  were  issued  in 
1955.  The  first,  NSC  5412/1,  made  the  Planning  and  Coordination 
Group  (PCG),  an  OCB  committee,  the  normal  channel  for  policy 
approval  of  covert  operations.^^  Approval  by  an  executive  committee 
was  now  the  rule.  The  second  NSC  directive  was  issued  later  in 
1955  and  remained  in  force  until  NSDM  40,  which  created  the  40 
Committee,  was  issued  in  February,  1970.  Because  of  the  significance 
of  this  second  directive — it  covered  policy  objectives  as  well  as  approval 
and  control  procedures — and  the  fact  that  it  stood  as  U.S.  policy  for 
fifteen  years,  it  deserves  detailed  consideration. 

The  directive  reiterated  previous  NSC  statements  that  the  overt 

'^The  Psychological  Strategy  Board  (PSB),  an  NSC  subcommittee  estab- 
lised  April  4,  1951.  was  charged  with  determining  the  "desirability  and  feasi- 
bility" of  proposed  covert  programs  and  major  covert  projects.  A  new  and 
expanded  "10/5  Panel"  was  established,  comprising  the  members  from  the  earlier 
10/2  Panel,  but  adding  staff  representation  of  the  PSB.  The  10/5  Panel  func- 
tioned much  as  the  10/2  Panel  had,  but  the  resulting  procedures  proved  cumber- 
some and  potentially  insecure.  Accordingly,  when  the  PSB  was  replaced  by 
the  Operations  Coordinating  Board  (OCB)  on  September  2.  1953.  coordination 
of  covert  operations  reverted  to  a  smaller  group  identical  to  the  former  10/2 
Panel,  without  OCB  staff  participation.  In  March  1954,  NSC  5412  was  issued. 
It  required  the  DCI  to  consult  with  the  OCB. 

"  NSC  5412/1  was  issued  March  12,  1955.  That  same  month  the  DCI  briefed 
the  PCG  on  all  CIA  covert  operations  previously  approved  under  NSC^-A,  10/2, 
10/5,  and  5412. 


51 

foreign  activities  of  the  U.S.  Government  should  be  supplemented  by 
covert  operations."  It  stated,  in  part,  that  the  CIA  was  authorized  to : 

— ^Create  and  exploit  problems  for  International  Com- 
munism. 

— Discredit  International  Communism,  and  reduce  the 
strength  of  its  parties  and  organization. 

— Reduce  International  Communist  control  over  any  areas 
of  the  world. 

— Strengthen  the  orientation  toward  the  United  States  of 
the  nations  of  the  free  world,  accentuate,  wherever  possible, 
the  identity  of  interest  between  such  nations  and  the  United 
States  as  well  as  favoring,  where  appropriate,  those  groups 
genuinely  advocating  or  believing  in  the  advancement  of  such 
mutual  interests,  and  increase  the  capacity  and  will  of  such 
peoples  and  nations  to  resist  International  Communism. 

— In  accordance  with  established  policies,  and  to  the  extent 
practicable  in  areas  dominated  or  threatened  by  International 
Communism,  develop  underground  resistance  and  facilitate 
covert  and  guerrilla  operations.  .  .  . 

The  directive  dealt  with  means  as  well  as  ends : 

— Specifiically,  such  [covert  action]  operations  shall  include 
any  covert  activities  related  to :  propaganda,  political  action, 
economic  warfare,  preventive  direct  action,  including  sabo- 
tage, anti-sabotage,  demolition,  escape  and  evasion  and  evac- 
uation measures ;  subversion  against  hostile  states  or  groups 
including  assistance  to  underground  resistance  movements, 
guerrillas  and  refugee  liberation  groups;  support  of  indige- 
nous and  anti-communist  elements  in  threatened  countries  of 
the  free  world;  deception  plans  and  operations  and  all  com- 
patible activities  necessary  to  accomplish  the  foregoing. 

Control  and  approval  procedures  were  significantly  altered  by  this 
directive.  The  OCB's  functions  were  transferred  to  "designated  repre- 
sentatives" of  the  Secretaries  of  State  and  Defense  and  the  President. 
This  was  the  first  time  a  "designated  representative"  of  the  President 
had  been  brought  into  the  approval,  or  consultative,  process.  The 
Special  Group,  as  this  committee  came  to  be  known,  was  charged  with 
reviewing  and  approving  covert  action  programs  initiated  by  the 
CIA." 

Even  under  the  new  directive,  criteria  oroverning  the  submission 
of  covert  action  projects  to  the  Special  Group  were  never  clearly 
defined. 

As  a  1967  CIA  memorandum  stated: 

The  procedures  to  be  followed  in  determining  which  CA 
[covert  action]  operations  required  approval  by  the  Special 


"  Coordination  procedures  were  slightly  modified  on  March  26,  1957.  The 
Secretary  of  State  was  given  sole  approval  authority  for  particul^irly  sensitive 
proiects  that  did  not  have  military  implications.  Further,  the  CIA  was  now 
required  to  keep  the  Departments  of  State  and  Defense  advised  on  the  progress 
in  implementing  all  approved  covert  action  programs. 


52 

Group  or  by  the  Department  of  State  and  other  arms  of  the 
U.S.  Government  were,  during  the  period  1955  to  March  1963, 
somewliat  cloudy,  and  thus  can  probably  best  be  described  as 
having  been  based  on  value  judgments  by  the  DCI. 

In  the  beginning,  meetings  of  the  Special  Group  were  infrequent. 
This  may  be  explained,  in  part,  by  the  special  relationship  that 
existed  among  CiA  Director  Allen  Dulles,  his  brother  John  Foster 
Dulles  w4io  was  Secretary  of  State,  and  President  Eisenhower.  Early 
in  1959,  regular  weekly  meetings  of  the  Special  Group  were  instituted, 
with  one  result  that  criteria  for  submission  of  projects  to  the  Group 
were,  in  practice,  considerably  broadened.  It  was  not  until  March  1963, 
however,  that  criteria  for  submission  to  the  Special  Group  became 
more  formal  and  precise.  These  submission  criteria  are  the  same  as 
exist  today.  (See  page  53.) 

One  other  development  during  this  period  deserves  mention.  After 
a  shoot-down  of  an  American  KB  47  aircraft  in  the  Baltic  region  in 
June  1959,  the  Special  Group  adopted  a  new  attitude  toward  recon- 
naissance in  sensitive  cases.  They  decided  that  review  required  for 
these  missions  had  previously  been  inadequate,  and  established  review 
on  a  routine  basis.  The  Joint  Chiefs  of  Staff  set  up  a  Joint  Recon- 
naissance Center  ( JRC)  to  present  monthly  peripheral  reconnaissance 
programs  to  the  Special  Group.  The  new  procedures  did  not  prevent 
the  U-2  incident  in  1960. 

With  the  inauguration  of  President  Kennedy  in  January  1961, 
Special  Group  meetings  were  transferred  to  the  White  House  under 
the  chairmanship  of  the  President's  Special  Assistant  for  National 
Security  Affairs,  McGeorge  Bundy.  For  a  brief  period.  General  Max- 
well Taylor,  President  Kennedy's  military  adviser,  chaired  the  group, 
but  this  role  was  again  assumed  by  Bundy  when  Taylor  became  Chair- 
man of  the  JCS.  Prior  to  1961,  the  State  Department  member  of  the 
Special  Group  had  been  the  "informal"  chairman. 

As  a  result  of  the  failure  of  the  Bay  of  Pigs,  control  procedures 
for  covert  operations  were  tightened.  The  Special  Group  continued 
its  once-a-week  meeting  format  and  President  Kennedy  was  informed 
more  frequently  of  covert  action  proposals.  At  the  same  time,  however, 
the  control  mechanism  for  approving  and  monitoring  covert  operations 
was  fragmented.  In  addition  to  the  Special  Group,  two  new  executive 
bodies  were  created — the  Special  Group  on  Counter  Insurgency  (CI) 
and  the  Special  Group  (Augmented) . 

On  January  18,  1963,  NSAM  124  was  issued.  This  directive  estab- 
lished the  Special  Group  (CI)  to  help  insure  effective  interagency 
programs  designed  to  prevent  and  resist  insurgency  in  specified  critical 
areas,  such  as  Laos.  Paramilitary  operations  were  a  central  focus  of 
this  new  group.  NSAM  124  did  not,  however,  supersede  previous  NSC 
directives  on  covert  operations.  Nevertheless,  a  certain  number  of 
operations  that  might  have  earlier  been  referred  to  the  Special  Group 
went  to  the  Special  Group  (CI).  General  Maxwell  Taylor  chaired 
this  group  and  McGeorge  Bundy  and  Robert  Kennedy  served  on  it, 
among  others. 

In  1962  a  third  NSC  subcommittee  was  established,  the  Special 
Group  (Augmented).  Its  purpose  was  to  oversee  Operation  MON- 
GOOSE, a  major  new  CIA  covert  action  program  designed  to  over- 
throw Fidel  Castro.  Its  membership  included,  in  addition  to  the  regu- 
lar Special  Group  members.  Attorney  General  Kennedy  and  General 


53 

Taylor.  Secretary  of  State  Kusk  and  Secretary  of  Defense  McNamara 
occasionally  attended  meetings.^* 

During  the  Johnson  Administration,  the  Special  Group,  which  was 
renamed  the  303  Committee,^^  continued  to  be  chaired  by  the  Presi- 
dent's Assistant  for  National  Security  Affairs,  first  McGeorge  Bundy, 
and,  after  1966,  Walt  Rostow.  The  most  important  regular,  high-level 
meeting  in  the  national  security  process  during  the  Johnson  years 
was,  however,  the  Tuesday  Lunch  group.  The  Tuesday  Lunch  began 
as  an  informal  meeting  of  President  Johnson,  Secretary  of  State  Rusk, 
Secretary  of  Defense  McNamara,  and  Bundy.  Gradually,  the  meetings 
became  a  regular  occasion  and  participation  was  enlarged  to  include 
the  President's  press  secretary,  the  Director  of  Central  Intelligence, 
and  the  Chairman  of  the  JCS.  The  agenda  of  the  Tuesday  Lunch  was 
devoted  primarily  to  operational  decisions — mostly  on  Vietnam.  Al- 
though the  Tuesday  Lunch  was  not  meant  to  substitute  for  the  303 
Committee,  it  probably  did  consider  important  matters  involving 
covert  operations  directed  at  North  Vietnam. 

2.  The  Jfi  Committee  and  current  procedures 

On  February  17, 1970,  NSDM  40  was  issued.  It  created  the  40  Com- 
mittee. The  directive  superseded  and  rescinded  past  NSC  covert  ac- 
tion directives.  It  discussed  both  policy  and  procedure.  With  regard 
to  policy,  NSDM  40  stated  that  it  was  essential  to  the  defense  and 
security  of  the  United  States  and  its  efforts  for  world  peace  that  the 
overt  foreign  activities  of  the  United  States  Government  continue  to 
be  supplemented  by  covert  action  operations. 

NSDM  40  assigned  the  DCI  responsibility  for  coordinating  and 
controlling  covert  operations.  The  Director  was  instructed  to  plan  and 
conduct  covert  operations  in  a  manner  consistent  with  United  States 
foreign  and  military  policies  and  to  consult  with  and  obtain  appro- 
priate coordination  from  any  other  interested  agencies  or  officers  on 
a  need-to-know  basis. 

The  directive  also  spelled  out  the  role  of  the  40  Committee.  It  stated 
that  the  DCI  was  resnonsible  for  obtaining  policy  approval  for  all 
major  and/or  politicallv  sensitive  covert  action  programs  through  the 
40  Committee.  In  addition,  NSDM  40  continued  the  Committee's 
responsibility  for  reviewing  and  apnrovino-  overhead  reconnaissance 
missions,  a  resnonsibility  first  acquired  in  1959. 

A  new  provision,  not  found  in  previous  NSC  directives,  required  the 
Committee  to  finnually  review  covert  operations  nreviouslv  approved, 
and  marip,  the  DCI  responsible  for  insuring  that  the  review  took  place. 

Guidelines  for  the  submission  of  covert  nrtion  pronos'ils  to  t^e  40 
ComiTiittep  were  spelled  out  in  an  internnl  CIA  directive.^"  The  Direc- 
tor of  Central  Intelligence  decided  whether  an  operational  program 

'^  For  a  detailed  account  of  the  workings  of  the  Special  Group  (Augmented), 
see  the  Committee's  In+erim  Report  on  "Alleged  Assassination  Plots  Involving 
Foreign  Tveafiers."  on.  139-148. 

"  In  June  1964  NSAM  30!?  was  issued.  NSAM  303  left  the  composition,  func- 
tions, and  responsibilities  of  the  Special  Group  unchanged.  The  effect  of  this 
directive  was.  quite  simply,  to  change  the  name  of  the  Special  Group  to  the  303 
Committf^e.  The  purpose  of  NSAM  303  was  .iwt  as  simple — the  name  of  the 
Special  Group  had  become  public  as  a  result  of  the  pnblication  of  the  book  The 
Tnvi.Hhle  Government  and.  therefore,  it  was  felt  that  the  name  of  the  covert 
action  apnroval  committee  should  be  changed. 

*"  This  directive  will,  at  least  initially,  continue  in  effect  for  the  new  Operations 
Advisory  Group. 


54 

or  activity  should  be  submitted  to  the  40  Committee  for  policy  ap- 
proval. The  paramount  consideration  was  political  sensitivity,  but  it 
was  also  significant  if  a  program  involved  large  sums  of  money.  In 
the  past,  a  "large"  project  was  one  costing  over  $25,000,  but  this  guide- 
line seems  less  clear  today.  As  a  general  rule,  the  following  types  of 
programs  or  activities  required  40  Committee  action:  political  and 
propaganda  action  programs  involving  direct  or  indirect  action  to 
influence  or  support  political  parties,  groups  or  specific  political  or 
militaiy  leaders  (this  included  governmental  and  opposition  ele- 
ments) ;  economic  action  programs;  paramilitary  programs;  and  coun- 
terinsurgency  programs  where  CIA  involvement  is  other  than  the 
support  and  improvement  of  the  intelligence  collection  capabilities  of 
the  local  services. 

The  internal  CIA  directive  also  stated  that  before  proposals  were 
presented  to  the  DCI  for  submission  to  the  40  Committee,  they  should 
be  coordinated  with  the  Department  of  State.  Further,  paramilitary 
action  programs  should  be  coordinated  with  the  Department  of  De- 
fense, and,  ordinarily^  concurrence  bv  the  v^mbassador  to  the  country 
concerned  would  be  required.  [Emphasis  added.] 

"Should"  and  "ordinarily"  were  underscored  for  an  important  rea- 
son :  major  covert  action  proposals  are  not  always  coordinated  among 
the  various  departments.  Nor,  for  that  matter,  were  they  always  dis- 
cussed or  approved  by  the  40  Committee.  For  example,  the  CIA's  1970 
effort  to  promote  a  military  coup  d'etat  in  Chile,  undertaken  at  the 
instruction  of  President  Nixon,  was  never  brought  before  the  40  Com- 
mittee. 

After  a  proposal  was  approved  by  the  DCI,  it  was  distributed  in 
memorandum  form  to  the  40  Committee  principals.^'  Except  in  emer- 
gencies, distribution  to  the  principals  was  to  occur  at  least  72  houre  in 
advance  of  a  meeting.  Normally,  the  written  proposal,  as  contained  in 
the  40  Committee  memorandum,  was  formallv  considered  folloAving 
an  oral  presentation  by  the  CIA.  This  presentation  was  usually  given 
by  the  Agency  Division  Chief  having  action  responsibility.  In  addi- 
tion to  the  principals,  participants  at  40  Committee  meetings  included, 
on  occasion,  the  CIA's  Deputy  Director  for  Operations,  a  representa- 
tive from  the  State  Department's  Bureau  of  Intelligence  and  Re- 
search, and  the  Assistant  Secretary  of  State  for  the  region  involv^ed. 

The  40  Committee  could  approve,  modify,  or  reject  any  covert  action 
proposal.  Proposals  involving  continuing  action — for  example,  a  sub- 
sidy to  a  political  group — were  normally  approved  for  a  fixed  period, 
one  year  or  less,  at  the  end  of  which  the  project  was  again  reviewed  by 
the  Committee  and  either  continued  or  eliminated.  Reconnaissance 
programs  were  rarely  dealt  with  at  these  meetings.  They  were  usually 
cleared  bv  telenhone  vote  rather  than  at  a  formal  meeting. 

Prior  to  1969  it  does  not  appear  that  all  40  Committee  approvals 
were  routinelv  referred  to  the  President.  The  President  would  become 
involved,  formally,  only  if  there  was  disagreement  within  the  Com- 
mittee, or  if  the  Chairman  or  another  member  thought  a  proposal  was 


^  The  memorandiim  described  the  proposal  in  summary  form :  what  it  was 
expected  to  accomplish,  its  cost  and  the  availability  of  funds,  whether  there  were 
alternative  means  for  achipvins:  the  objectives  sought,  the  risks  involved,  and 
the  possible  consequences  of  disclosure. 


55 

sufficiently  important,  or  sensitive,  to  warrant  the  President's  attention. 
However,  as  a  result  of  the  Hughes-Ryan  Amendment  to  the  1974 
Foreign  xVssistance  Act,  the  President  is  notified  once  a  covert  action 
proposal  has  been  approved  by  his  executive  committee.  The  Presi- 
dent is  then  required  to  certify  to  Congress  that  the  approved  covert 
action  proposal  is  "important  to  the  national  security  interests  of  the 
Ignited  States."  The  DCI  then  informs  the  Congress  of  this  "Presiden- 
tial Finding"  in  a  "timely  manner."  In  practice,  informing  Congress 
means  notifying  six  different  committees — the  Senate  and  House  Com- 
mittees on  Armed  Services,  Foreign  Relations  and  Appropriations.^- 
The  DCI  does  not,  however,  feel  obligated  to  infonn  the  six  commit- 
tees of  approved  covert  action  operations  prior  to  their  implementa- 
tion, although  in  some  cases  he  has  done  so.  Once  the  "Presidential 
Finding"  is  in  hand,  the  CIA's  Directorate  of  Operations  implements 
the  proposal. 

During  the  early  years  of  the  Nixon  Administration,  40  Conmiittee 
meetings  were  held  regularly  although,  on  occasion,  proposals  were 
approved  by  telephone  vote.  Over  time,  however,  formal  meetings  be- 
came fewer  and  fewer.  This  was  due,  in  part,  to  a  decline  in  covert  ac- 
tion projects.  Most  business  was  done  by  telephone  after  proposals  had 
been  circulated  in  advance  by  couriers.  Business  became  routine.  "Tele- 
phone concurrences,"  involving  quick  checks  rather  than  intensive 
discussion,  was  the  rule.  However,  for  major  new  departures,  the  Com- 
mittee met  in  person.  For  example,  the  40  Committee  met  nine  times 
between  January  22  and  December  11,  1975,  to  discuss  Angola.  The 
National  Security  Council  met  once,  on  June  27,  1975.  In  addition,  an 
Interagency  Working  Group  on  Angola  met  24  times  between  August 
13,  1975,  and  January  14, 1976.  The  number  and  frequency  of  meetings 
on  Angola  appears  to  reflect  a  need  on  the  part  of  policymakers  to  sit 
down  and  discuss  the  desirability  and  mechanics  of  undertaking  a 
major  new  covert  operation.  "Wlien  a  new  departure  is  not  being  con- 
sidered, when  policy  and  interests  are  not  shifting,  40  Committee  busi- 
ness remained  routine,  usually  conducted  by  telephone. 

Two  additional  points  concerning  40  Committee  procedures  are  im- 
portant. First,  covert  action  proposals  were  resubmitted  by  the  DCI 
to  the  40  Committee  when  there  was  a  need  to  reassess  or  reaffirm  pre- 
vious policy  decisions.  Resubmission  would  occur  if  new  developments 
warranted  it,  or  if  specifically  required  by  the  40  Committee  at  the 
time  of  approval. 

Second,  status  reports  on  covert  action  programs  and  activities  were 
submitted  when  requested  by  the  40  Committee  or  at  the  discretion  of 
the  DCI.  Status  reports  were  presented  at  least  annually  to  the  40 
Committee  for  each  continuing  activity  approved  by  the  Committee. 
Apparently,  however,  these  annual  reviews  were  little  more  than  pro 
forma  exercises  carried  out  by  the  DCI.  They  were  not  thorough 
examinations  of  on-going  projects  by  the  40  Committee  principals." 

^  In  addition,  both  the  Senate  and  House  Select  Committees  on  Intelligence 
Activities  were  briefed  on  current  covert  operations. 

^  According  to  the  CIA,  prior  to  the  review  of  these  annual  reports  by  the 
40  Committee  principals  they  were  submitted  in  draft  to  the  concerned  agencies 
for  comment.  Thus,  the  staff  of  40  Committee  principals  had  an  opportunity  to 
examine  on-going  projects. 


56 

3.  Covert  Action  Approvals 

It  is  difficult  to  determine  the  number  of  covert  operations  approved 
over  the  years  by  the  40  Committee  or  its  predecessors.  Records  for 
the  early  years  are  either  not  available  or  are  incomplete.  Also,  there 
has  been  a  steady  refinement  of  "programs"  into  individual  "projects," 
thus  making  comparisons  difficult.  Despite  this,  a  rough  determination 
can  be  made  of  projects  approved  for  the  period  1949  to  1967.^* 

Between  1949  and  1952,  81  projects  were  approved  by  the  DCI  on 
his  own  authority  after  coordination  with  either  the  10/2  or  10/5 
Panels.  During  the  first  two  years  of  the  Eisenhower  administration, 
1953-54,  66  projects  were  approved  by  the  DCI  in  coordination  with 
the  Operations  Coordination  Board  or  the  Psychological  Strategy 
Board.  Between  March  1955  and  February  1967,  projects  approved 
or  reconfirmed  by  the  Operations  Coordination  Board,  the  Special 
Group,  or  the  303  Committee  were  as  follows : 

Eisenhower  administration — 104 
Kennedy  administration — 163 
Johnson  administration — 142 

These  totals  reflect  two  things :  first,  an  increase  in  the  number  of 
projects  approved  and,  second,  a  tightening  up  of  approval  proce- 
dures. Regarding  procedures,  a  CIA  memorandum,  dated  February 
25, 1967,  stated : 

As  the  sophistication  of  the  policy  approval  process  developed 
so  did  the  participation  of  the  external  approving  authority. 
Since  establishment  of  the  Special  Group  (later  303  Com- 
mittee), the  policy  arbiters  have  questioned  CIA  presenta- 
tions, amended  them  and,  on  occasion,  denied  them  outright. 
The  record  shows  that  the  Group/Committee,  in  some  in- 
stances, has  overridden  objections  from  the  DCI  and  in- 
structed the  Agency  to  carry  out  certain  activities.  .  .  . 
Objections  by  State  have  resulted  in  amendment  or  rejection 
of  election  proposals,  suggestions  for  air  proprietaries  and 
support  plans  for  foreign  governments.  .  .  .  The  Committee 
has  suggested  areas  where  covert  action  is  needed,  has  decided 
that  another  element  of  government  should  imdertake  a  pro- 
posed action,  imposed  caveats  and  turned  down  specific  pro- 
posals for  CIA  action  from  Ambassadors  in  the  field. 

Whereas  the  "sophistication  of  the  policy  approval  process"  and 
the  "participation  of  the  external  approving  authority"  has  increased 
significantly  since  the  establishment  of  the  Special  Group  in  1955,  this 
has  not  meant  that  all,  or  even  a  majority,  of  covert  action  projects 
have  been  approved  by  the  "external  approving  authority."  Low-risk, 
low-cost  covert  action  projects,  such  as  a  routine  press  placement  or 
the  development  of  an  "agent  of  influence,"  do  not  receive  this  atten- 
tion. In  this  regard,  an  Agency  memorandum,  dated  February  21, 
1967,  stated : 

It  is  obvious  that  a  compilation  of  Special  Group  approvals 
in  no  way  reflects  the  totality  of  significant  CIA  activities 
carried  on  over  the  past  15  years.  With  respect  to  overall 


'  These  numbers  may  include  reapprovals  of  projects  initiated  earlier. 


57 

DDP  activity,  it  does  not  include  any  mention  of  FI/CI 
[Foreign  Intelligence/Coimterintelligence]  actions  or,  of 
course,  any  decisions  in  the  overt  field.  Even  within  the  re- 
stricted framework  of  covert  action  alone,  a  1963  study  pre- 
pared by  this  office  showed  that  of  the  550  existing  CIA  proj- 
ects of  the  DDP  which  were  reviewed  against  the  back- 
ground of  our  own  internal  instruction  on  Special  Group 
submission,  only  86  were  separately  approved  (or  reap- 
pro  ved)  by  the  Special  Group  between  1  January  and  1 
December  1962. 

Using  the  figures  cited  above,  this  would  mean  that  16  percent  of 
all  covert  action  projects,  large  and  small,  received  Special  Group 
approval  between  January  1  and  December  1,  1962.  The  Select  Com- 
mittee's own  review  indicates  that  of  the  several  thousand  covert  ac- 
tion projects  undertaken  since  1961,  only  14  percent  Avere  considered 
on  a  case-by-case  basis  by  the  40  Committee  or  its  predecessors.^^  Those 
not  reviewed  by  the  committee  were  the  low-risk,  low-cost  type  re- 
ferred to  above. 

Another  indication  of  the  number  of  covert  action  proposals  which 
eventually  reached  the  40  Committee  is  contained  in  the  CIA's  1972 
Covert  Action  Manual.  According  to  this  document,  "the  40  Commit- 
tee actually  looks  at  about  one-fourth  of  our  covert  action  projects." 
The  Manual  continues : 

.  .  .  this  proportion  is  a  reflection  on  the  nature  of  the  proj- 
ect system,  not  on  any  lack  of  policy  approval  for  our  covert 
actions.  For  example,  the  Agency  would  have  separate  proj- 
ects for  each  of  a  number  of  media  assets  that  might  be 
brought  to  bear  on  an  overall  program  of  persuasion,  but  the 
40  Committee  would  focus  on  the  program  with  its  descrip- 
tions of  the  specific  assets  to  be  employed.  .  .  .  Thus,  the  i7n- 
portant  point  on  policy  is  that  the  lO  Committee  considers 
individually  all  major  and  critical  projects  providing  broader 
pi'ogram  guidelines  for  the  remainder  of  our  covert  activity. 
[Emphasis  added.] 

If..  The  NjSC  and-  Covert  Activities :  Conclusions 

Several  points  stand  out  in  the  history  of  the  committees  charged 
with  overseeing  covert  operations.  The  most  obvious  has  less  to  do 
with  procedures  than  with  the  substance  of  the  projects  approved.  The 
justification  for  covert  operations  has  changed  sharply,  from  con- 
taining International  (and  presumably  monolithic)  Communism  in 
the  early  1950s  to  merely  serving  as  an  adjunct  to  American  foreign 
policy  in  the  1970s.  It  should  be  noted  that  early  NSC  directives  framed 
the  purpose  of  covert  operations  entirely  in  terms  of  opposition  to 
International  Communism.  By  contrast,  NSDM  40  described  covert 
actions  as  those  secret  activities  designed  to  further  official  United 
States  programs  and  policies  abroad. 


'^  According  to  the  CIA.  since  the  Hughes-Ryan  Amendment  to  the  1974  For- 
eign Assistance  Act.  all  covert  action  projects  not  submitted  on  a  case-by-case 
basis  have  been  submitted  to  the  President  for  approval  and  to  the  oversight 
committees  of  Congress  for  its  information  in  collective,  omnibus  fonn. 


58 

As  stated,  procedural  arrangements  for  considering  and  approv- 
ing covert  operations  have  been  formalized  and  tightened  over  the 
years.  NSC-4-A  of  1947  established  no  formal  procedures  for  co- 
ordinating or  approving  operations;  the  DCI,  in  liaison  with  State 
and  Defense,  was  to  ensure  that  operations  were  consistent  with 
United  States  policy.  Over  time,  procedures  were  developed  and  guide- 
lines established  to  indicate  which  covert  action  proposals  required 
40  Committee  approval.  The  requirement  of  a  "Presidential  Finding" 
in  the  1974  Foreign  Assistance  Act  not  only  requires  the  President 
to  certify  to  Congress  that  an  approved  covert  operation  is  important 
to  the  national  security  of  the  United  States,  but,  in  effect,  compels 
him  to  become  aware  of  actions  approved  by  the  40  Committee.^*'  The 
concept  of  plausible  denial,  at  least  as  it  applies  to  the  President, 
is  dead.  Major  new  covert  operations  cannot  be  undertaken  without 
the  knowledge,  and  approval,  of  the  Chief  Executive.  President 
Ford's  Executive  Order  takes  this  one  step  further.  The  new  Opera- 
tions Advisory  Group  will  not  be  responsible  for  policy  approval 
of  covert  operations,  as  was  the  40  Committee.  According  to  the 
Executive  Order,  the  Group  will  "consider  and  develop  any  policy 
recommendation,  including  any  dissents,  for  the  President  prior  to 
his  decision"  on  each  covert  operation.  The  approval  of  covert  opera- 
tions now  rests  solely  with  the  President. 

However,  recognition  that  procedural  arrangements  for  consider- 
ing and  approving  covert  operations  have  become  tighter  does  not 
necessarily  imply  that  they  are  adequate.  Significant  issues  regarding 
the  control  of  covert  operations  remain.  First,  the  criteria  for  deter- 
mining which  covert  operations  are  brought  before  the  Executive  are 
still  inadequate.  Small  covert  action  projects  not  deemed  politically 
risky  can  be  approved  within  the  CIA.  Although  many  of  these  are 
in  support  of  projects  already  approved  by  the  Executive,  they  never- 
theless make  up  a  majority  of  all  CIA  covert  action  projects.  In 
addition,  some  of  the  low-risk  projects  approved  within  the  CIA,  such 
as  the  development  of  a  foreign  "asset,"  may  prove  to  be  extremely 
sensitive  and  risky.  One  CIA  "asset,"  given  the  cryptonym  QJ/WIN, 
was  recruited  to  spot  "individuals  with  criminal  and  underworld 
connections  in  Europe  for  possible  multi-purpose  use."  ^^  Later  the 
CIA  contemplated  using  Q J/WIN  for  its  ZK/KIFLE  project,  a  "gen- 
eral stand-by  capability"  to  carry  out  assassination  when  required. 
Other  CIA  individual  project  "assets"  used  in  connection  with  plots 
to  assassinate  foreign  leaders  were  WI/ROGUE  and  AM/LiVSH. 


^  President  Ford  has  recommended  that  the  "Presidential  Finding"  require- 
ment be  dropped.  In  his  message  to  Congress  outlining  his  intelligence  reor- 
ganization, the  President  recommended  that  the  1974  Foreign  Assistance  Act 
(Public  Law  93-559)  be  modified  as  proposed  by  the  Commission  on  the  Organi- 
zation of  the  Government  for  the  Conduct  of  Foreign  Policy.  That  Commission, 
charged  by  Robert  Murphy,  recommended : 

"We  propose  that  Public  Law  93-559  be  amended  to  require  reporting  of 
covert  actions  to  the  proposed  Joint  Committee  on  National  Security,  and  to 
omit  any  requirement  for  the  personal  certification  of  the  President  as  to  their 
necessity."  (Commission  on  the  Organization  of  the  Government  for  the  Conduct 
of  Foreign  Policy,  6/75.  p.  101.) 

^  Senate  Select  Committee,  "Alleged  Assassination  Plots  Involvine  Foreign 
Leaders,"  p.  182.  See  this  report  for  a  full  discussion  of  QJ/WIN,  ZR/RIFLE, 
WI/ROGUE  and  AM/LASH. 


59 

Though  none  of  these  specific  projects  were  apparently  approved  by 
the  ;NkSC,  several  ranking  CIA  officials  testified  that  they  were  within 
the  general  policy  approved  at  the  NSC  level. 

Second,  there  were  gaps  in  40  Committee  supervision,  notably  in 
the  sensitive  areas  of  human  espionage  and  counterintelligence. 
Whether  intended  or  not,  espionage  and  counterintelligence  operations 
may  have  the  effect  of  political  action,  A  former  chairman  of  the 
Special  Group,  McGeorge  Bimdy,  has  testified  that  the  distinction 
among  these  operations  needs  re-examination.  According  to  Bundy: 

Intelligence  collection  is  often  separated  from  covert  opera- 
tions in  the  thinking  of  intelligence  administrators  and 
other  concerned  officials.  I  think  this  distinction,  like  the 
parallel  distinction  in  the  field  of  counterintelligence,  de- 
serves re-examination.  Both  intelligence  collection  and  coun- 
terintelligence have  involved  covert  activity  which  goes  well 
beyond  conventional  espionage  and  counterespionage,  and 
such  enlargements  of  activity  often  present  many  of  the  same 
dangers  as  covert  actions  of  other  sorts.^* 

Espionage  operations  can  have  the  effect  of  political  action.  A  pay- 
ment to  a  dissident  leader  may  be  designed  to  collect  intelligence  on 
the  leader's  group,  but  it  may  also  be  regarded  as  support  for  the 
group's  objectives.  Counterintelligence  operations  can  have  a  similar 
impact.  Counterintelligence  measures  used  to  enlist  the  support  of 
local  intelligence  and  police,  neutralize  hostile  intelligence  services,  and 
discredit  local  CIA  opponents  are  sometimes  indistinguishable  from 
covert  action.  As  such,  the  issue  is  whether  these  intelligence  activities 
can,  or  should,  be  made  subject  to  effective  executive  branch  and  con- 
gressional oversight.  President  Ford's  Executive  Order  does  not  ad- 
dress this  issue.  The  Operations  Advisory  Group  will  be  responsible 
.for  approving  certain  "sensitive  intelligence  collection  operations,"  but 
the  Executive  Order  does  not  apparently  include  human  as  well  as 
technical  collection.  Nor  is  there  any  reference  to  Operations  Group 
review  or  approval  of  any  counterintelligence  activities. 

Tliird,  there  is  a  basic  conflict  between  sufficient  consultation  to  en- 
sure accountability  and  sound  decisions  on  the  one  hand,  and  secure 
operations  on  the  other.  40  Committee  approval  procedures  for  covert 
operations  were,  on  occasion,  by-passed  by  the  President  or  his  Na- 
tional Security  Affairs  adviser.  For  highly  sensitive  proposals  the 
number  of  individuals  or  agencies  consulted  or  informed  is  some- 
times sharply  limited  on  a  "need  to  know"  basis.  Even  the  ambassador 
in  the  country  where  the  operation  is  to  be  conducted  may  not  be  in- 
formed. Middle  and  lower  level  officials  within  the  State  Department 
or  the  CIA  with  expertise  may  not  be  consulted.  The  risk  of  inadequate 
consultation  was  aggravated  by  the  informality  of  telephone  clear- 
ances. President  Ford's  Executive  Order  attempts  to  remedy  this  de- 
ficiency, at  least  in  part.  The  Executive  Order  states : 

The  Operations  Group  shall  discharge  the  responsibilities 
assigned  .  .  .  only  after  consultation  in  a  formal  meeting  at- 

''*  McGeorge  Bundy  testimony,  House  Select  Committee  on  Intelligence, 
12/10/75. 


60 

tended  by  all  members  and  observers ;  or . . .  when  a  designated 
representative  of  the  member  or  observer  attends.^*^ 

Finally,  the  annual  review  of  covert  actions  by  the  40  Committee 
dirl  not  appear  to  be  searching  or  thorough.  Annual  reviews  were 
often  handled  in  the  same  informal  manner  as  approvals  for  new 
covert  action  proposals — by  telephone  concurrence.  Some  ongoing 
covert  operations  have  been  challenged  over  the  years,  most  often  by 
the  State  Department.  Some  die  a  natural  death.  Some  linger  on  for  as 
long  as  20  to  25  years.  It  appears  that  some  covert  operations,  such 
as  those  in  Italy,  may  come  to  an  end  only  when  they  are  exposed.  Presi- 
dent Ford's  Executive  Order  contains  two  provisions  to  increase  the 
number  of  covert  action  reviews.  First,  the  Operations  Advisory  Group 
will  he  required  to  "conduct  periodic  reviews  of  programs  previously 
considered."  There  is  no  requirement,  however,  that  these  reviews  must 
take  place  at  a  formal  meeting.  Second,  the  Executive  Order  requires 
the  fnll  National  Security  Council  to  review,  twice  a  year,  the  "con- 
tinued appropriateness"  of  ongoing  covert  operations. 

5.  Role  of  0MB 

In  order  to  meet  unanticipated  needs,  the  CIA  maintains  a  Con- 
tingency Eeserve  Fund.  The  fund  is  replenished  bv  annual  appropria- 
tions as  well  as  unobligated  funds  from  previous  CIA  appropriations. 
More  ofi-en  than  not,  the  unanticipated  needs  of  the  CIA  relate  to 
covert  operations. 

The  Director  of  Central  Intelligence  has  the  authority,  under  the 
Central  Intelligence  As:ency  Act  of  1949,  to  spend  reserve  funds  with- 
out consulting  0MB.  However,  due  to  an  arrangement  among  0MB, 
the  CIA,  and  the  Appropriations  Committees  of  Congress,  the  CIA 
has  a.o-reed  not  to  use  reserve  funds  without  0MB  approval.  There  is 
no  evidence  that  the  DCI  has  ever  violated  this  agreement.  In  prac- 
tice. 0MB  holds  a  double  kev  to  this  reserve  fund :  first.  Tt  approves 
additions  to  the  reserve  fund  and.  second,  it  approves  the  amounts  to 
be  released  from  the  fund,  upon  CIA  request  and  justification.  0MB 
holds  a  careful  review  of  each  proposed  release.  Turndowns  are  rare, 
but  reductions  in  amounts  requested  occur  often  enough  to  prompt  a 
careful  CIA  presentation  of  its  case. 

Despite  these  levers  of  control.  0MB  hns  faced  severpl  handicaps 
which  render  its  control  of  the  Contingencv  Reserve  Fund  less  effective 
than  it  might  be.  First,  OMB  has  not,  in  the  past,  been  renresented  on 
the  National  Security  Council  or  the  40  Committee. ^^  Much  of  the 
dollar  volume  of  reserve  releases  originates  in  40  Committee  action. 
Thus,  OMB  resistance  to  reserve  release  requests  were  often  in  the  face 
of  policv  determinations  already  made.  Second,  although  tbe  chairmen 
of  the  appropriations  subcommittees  of  Congress  are  notified  of  draw- 
downs from  the  fu7id,  these  notifications  occur  after  the  release  action, 
even  though  the  release  is  conceptually  the  same  as  a  supplemental  ap- 
propriation. Thus,  OMB  does  not  have  the  leverage  in  regard  to 

^^  Executive  Order  1905.  Sec.  Sfc)  (3). 

^  Under  President  Ford's  Executive  Order,  the  Director  of  OMR  will  sit  as 
an  observer  on  the  Operations  Arvisory  Group,  the  successor  to  the  40  Committee. 


61 

Contingency  Reserve  Fund  releases  that  it  does  in  regard  to  supple- 
mental appropriatitons  requests  (where  0MB  is  a  party  to  recom- 
mending supplemental  to  the  President  and  Congress). 

0MB  suffers  other  limitations  with  respect  to  the  use  of  CIA  funds 
for  covert  operations.  First,  CIA's  budget  submission  to  0MB  has, 
in  the  past,  neglected  some  aspects  of  clandestine  spending,  notably 
proprietary  activities.  Second,  current  ground  rules  allow  the  repro- 
gramming  of  CIA's  regular  appropriations  to  meet  unanticipated 
needs ;  no  0MB  approval  is  required  for  this  reprogramming.  To  the 
extent  that  the  above  funds  are  used  for  covert  operations,  0MB  has 
no  control  over  their  use. 

C.  Providing  the  Intelligence  Required  by  Policymakers 

1.  Work  of  NSCIC 

The  National  Security  Coimcil  Intelligence  Committ-ee  was  formed 
in  November  1971.  At  its  first  meeting,  a  Working  Group,  composed 
primarily  of  officials  from  the  intelligence  community,  was  established. 
That  composition  was  soon  seen  as  inappropriate  for  a  committee 
whose  main  purpose  was  to  make  intelligence  more  responsive  to  the 
needs  of  policymaking  "consumers."  As  a  result,  at  its  second — and 
last — meeting,  NSCIC  changed  the  composition  of  the  Working  Group 
to  exactly  parallel  the  parent  body.^° 

The  various  representatives  who  sat  on  the  Working  Group  were 
not  the  "intelligence"  specialists  from  those  agencies,  but  officials  with 
policymaking  responsibilities.  For  example,  the  State  Department  was 
represented  by  the  Director  of  the  Bureau  of  Politico-Military  Affairs, 
not  the  Director  of  the  Bureau  of  Intelligence  and  Research.  Repre- 
sentatives were  to  seek  the  views  of  the  operating  bureaus  of  their 
agencies  on  major  intelligence  questions. 

An  August  1974  meeting  of  NSCIC  produced  two  direct  results.  In 
response  to  a  request  for  some  mechanism  to  highlight  critical  intelli- 
gence memoranda,  the  DCI  now  puts  out  "alert  memoranda" — brief 
notices  in  a  form  which  cannot  be  overlooked.  The  meetinsf  also  resulted 
in  the  production  of  a  National  Intelligence  Estimate  (NIE)  on  Soviet 
perceptions  of  the  United  States. 

Before  it  was  abolished,  NSCIC  began  reviewing  the  basic  docu- 
ments which  levy  requirements  on  the  intelligence  community — ^the 
DCI's  Perspectives  on  Intelligence,  Substantive  Obiectives,  and  espe- 
cially, Key  Intelligence  Questions  (KIQs).  NSCIC  also  set  up  a 
Working  Group  panel  to  conduct  surA^eys  of  intelligence  community 
publications.  There  was  also  an  NSCIC  subcommittee  which  consid- 
ered economic  intelligence,  chaired  bv  the  Assistant  Secretary  of  the 
Treasury  for  International  Affairs.  The  subcommittee  was  inactive. 

^The  Assistant  to  the  President  for  National  Security  Affairs  (Chairman), 
the  DCI  (Vice  Chairman),  the  Deputy  Secretaries  of  State  and  Defense,  the 
Chairman,  JCS,  and  the  Under  Secretary  of  Treasury  for  Monetary  Affairs. 


62 

^.  Limitations  on  Effectiveness 

NSCIC's  work  reflected  the  basic  dilemma  inherent  in  suiting  intel- 
ligence to  the  needs  of  policymakers.  The  intelligence  community  must 
be  close  enough  to  policymakers  to  know  what  is  desired,  yet  distant 
enough  to  preserve  its  objectivity.  Within  this  framework,  the  diflFer- 
ing  demands  of  many  kinds  of  policymakers  must  be  balanced.  For 
example,  making  the  intelligence  community  more  responsive  to  the 
needs  of  Cabinet-level  officials  might  diminish  the  quality  of  the  intel- 
ligence produced  for  middle-level  officials. 

The  limited  effectiveness  of  NSCIC  was  due  to  several  factors : 

— The  apparent  lack  of  interest  of  senior  officials  in  making  NSCIC 
work. 

— The  demands  of  other  business  on  the  sub-cabinet  level  officials 
who  made  up  NSCIC. 

— "Consumer"  unfamiliarity  with  the  intelligence  community.  Of 
necessity,  NSCIC  spent  most  of  its  time  educating  policymakers  about 
the  community  and  what  it  can  do.  Most  officials  in  policymaking  posi- 
tions, especially  those  in  senior  positions,  bring  little  intelligence  ex- 
perience to  their  jobs.  One  of  NSCIC's  first  tasks  was  to  produce  a 
manual  about  the  community  for  policymakers. 

— Diversity  among  "consumers."  Cooperative  arrangements  and  the 
tradition  of  working  together  are  matters  of  long  standing  within  the 
intelligence  community.  By  contrast,  NSCIC  represented  a  first  at- 
tempt to  bring  "consumers"  together.  The  newness  of  the  endeavor 
combined  with  the  diversity  of  the  "consumers"  made  it  difficult  for 
NSCIC  to  function  effectively. 

3.  Conclusions 

The  intelligence  community  has  not- always  been  responsive  to  the 
needs  of  policymakers.  Some  have  argued  that  the  intelligence  product 
is  more  a  reflection  of  what  "producers,"  rather  than  "consumers," 
deem  important.  This  is  debatable.  What  is  not  at  issue,  however,  is 
that  "consumers"  should  drive  the  intelligence  process.  NSCIC  was  a 
disappointment  in  this  regard.  To  say  this  is  not  to  imply  that  the  in- 
telligence commmiity  has  been  unresponsive  to  the  needs  of  policy- 
makers. Just  the  opposite  may  be  true.  "Producers"  and  "consumers" 
get  together  almost  daily  at  NSC  subcommittee  meetings  (e.g.,  the 
Senior  Review  Group  and  the  Washington  Special  Action  Group.) 
Intelligence  requirements  are  levied,  informally,  at  these  meetings.  It 
can  be  assumed  that  the  intelligence  community  has  been  responsive  to 
these  informal  requirements  and  hence  the  need  for  a  more  formal 
NSC  mechanism — NSCIC — was  eliminated.  The  new  Committee  on 
Foreign  Intelligence  vtdll  now  have  the  responsibility  for  seeing  that 
policymakers  are  provided  the  intelligence  they  need. 

D.  Advertising  the  President  on  Intelligence  Issues 

1.  Overview 

The  President  needs  an  independent  bodv  to  assess  the  quality  and 
effectiveness  of  our  foreign  intelligence  effort.  Since  1956  the  Presi- 
dent's Foreign  Intelligence  Advisory  Board  (PFIAB)  has  served 
this  function.  Numerous  proposals  have  recently  been  made  to  make 


63 

PFIAB  an  executive  "watchdog"  over  United  States  foreign  intelli- 
gence activities.  Some  have  suggested  that  a  joint  presidential/ 
congressional  intelligence  board  be  established  or,  at  the  least,  Senate 
confirmation  of  members  of  the  President's  board  be  required.  The 
Rockefeller  Commission  recommended  that  the  Board's  functions  be 
expanded  to  include  oversight  of  the  CIA  with  responsibility  for 
assessing  CIA  compliance  with  its  statutory  authority.  The  Murphy 
Commission  commented  favorably  on  the  Rockefeller  Commission 
recommendations.  Whether  PFIAB  should  adopt  this  oversight  or 
"watchdog"  function,  or  whether  Congress  should  be  involved  in  the 
activities  of  the  Board  is  open  to  question.  President  Ford,  in  his 
Executive  Order,  decided  against  transforming  the  Board  into  a  CIA 
watchdog.  Instead,  he  created  a  new  three-member  Intelligence  Over- 
sight Board  to  monitor  the  activities  of  the  intelligence  community. 

2.  History  of  PFIAB 

On  February  6,  1956,  President  Eisenhower  created,  by  Executive 
Order,  the  Board  of  Consultants  on  Foreign  Intelligence  Activities. 
The  Board  was  established  in  response  to  a  recommendation  by  the 
second  Hoover  Commission,  calling  for  the  President  to  appoint  a 
committee  of  private  citizens  who  would  report  to  him  on  United 
States  foreign  intelligence  activities.  Creation  of  the  Board  was  also 
intended  to  preempt  a  move  in  Congress  at  the  time,  led  by  Senator 
Mike  Mansfield,  to  establish  a  Joint  Congressional  Committee  on 
Intelligence. 

The  Board  ceased  functioning  when  President  Eisenhower  left 
office  in  1961,  but  was  reactivated  by  President  Kennedy  following 
the  Bay  of  Pigs  failure.  It  was  renamed  the  President's  Foreign 
Intelligence  Advisory  Board  (PFIAB)  and  has  functioned,  unin- 
terrupted, since  that  time. 

3.  PFIAB  Today 

The  Board  currently  operates  under  Executive  Order  11460,  issued 
by  President  Nixon  on  March  20,  1969.  The  Board  is  responsible  for 
reviewing  and  assessing  United  States  foreign  intelligence  activities. 
It  reports  to  the  President  periodically  on  its  findings  and  recom- 
mendations for  improving  the  effectiveness  of  the  nation's  foreign 
intelligence  effort. 

The  Board  presently  has  seventeen  members,  all  drawn  from  private 
life  and  all  appointed  by  the  President.  It  is  chaired  by  Leo  Cherne, 
and  holds  formal  meetings  two  days  every  other  month.  It  has  a  staff 
of  two,  headed  by  an  executive  secretary. 

As  its  name  indicates,  the  Board  is  advisory.  Board  reports  and  rec- 
ommendations have  contributed  to  the  increased  effectiveness  and  effi- 
ciency of  our  foreign  intelligence  effort.  For  example,  the  Board  played 
a  significant  role  in  the  development  of  our  overhead  reconnaissance 
program.  It  has  made  recommendations  on  coordinating  American 
intelligence  activities;  reorganizing  Defense  intelligence;  applying 
science  and  technology  to  the  National  Security  Agency,  and  rewriting 
the  National  Security  Council  Intelligence  Directives  (NSCIDs).  The 
Board  has  conducted  post-mortems  on  alleged  intelligence  failures  and, 
since  1969,  made  a  yearly,  independent  assessment  of  the  Soviet  stra- 
tegic threat,  thereby  supplementing  regular  community  intelligence 


64 

assessments.  Most  recently,  it  has  reported  to  the  President  on  economic 
intelligence  and  human  clandestine  intelligence  collection. 

The  Board  has  not  served  a  "watchdog"  function.  As  the  Rockefeller 
Commission  noted,  the  Board  does  not  exercise  control  over  the  CIA, 
which  is,  in  fact,  the  Board's  only  source  of  information  about  Agency 
activities.  When  the  Board  has  occasionally  inquired  into  areas  of 
possible  illegal  or  improper  CIA  activity,  it  has  met  resistance.  For 
example,  when  the  Board  became  aware  of  the  so-called  Huston  Plan 
•  and  asked  the  FBI  and  the  Attorney  General  for  a  copy,  the  request 
was  refused.  The  Board  did  not  pursue  the  matter  with  the  White 
House.  In  1970,  the  Board  was  asked  by  Henry  Kissinger,  then  the 
President's  National  Security  Advisor,  to  examine  Allende's  election 
victory  in  Chile  to  determine  whether  the  CIA  had  failed  to  foresee, 
and  propose  appropriate  actions,  to  prevent  Allende's  taking  office.  The 
Board  requested  40  Committee  and  NSC  minutes  to  determine  the 
facts.  Its  request  was  refused  and  its  inquiry  was  dropped. 

The  President  needs  an  independent  body  to  assess  the  quality  and 
effectiveness  of  our  foreign  intelligence  effort.  In  the  words  of  its 
Executive  Secretary,  the  Board  has  "looked  at  intelligence  through  the 
eyes  of  the  President."  PFIAB  has  served,  in  effect,  as  an  intelligence 
"Kitchen  Cabinet."  The  Board  has  been  useful,  in  part,  because  its 
advice  and  recommendations  have  been  for  the  President.  As  such,  the 
executive  nature  of  this  relationship  should  be  maintained. 

Over  the  years,  many  of  PFIAB's  recommendations  have  been 
adopted,  and  others  have  served  as  a  basis  for  later  reform  or  reorga- 
nization. The  Board  has  not  been  an  executive  "watchdog"  of  the  CIA. 
To  make  it  so  would  be  to  place  the  Board  in  an  untenable  position : 
adviser  to  the  President  on  the  quality  and  effectiveness  of  intelligence 
on  the  one  hand  and  "policeman"  of  the  intelligence  community  on 
the  other.  These  two  roles  conflict  and  should  be  performed  separately. 

J)..  Intelligence  Oversight  Board 

To  assist  the  President,  the  NSC,  and  the  Attorney  General  in  over- 
seeing the  intelligence  community.  President  Ford  has  created  an 
Intelligence  Oversight  Board.  The  Board  will  consist  of  three  private 
citizens  appointed  by  the  President.  They  will  also  serve  on  PFIAB. 

The  Board  will  be,  in  effect,  a  community-wide  Inspector  General  of 
last  resort.  It  will  review  reports  from  the  Inspectors  General  and 
General  Counsels  of  the  intelligence  community  and  report  periodi- 
cally to  the  Attorney  General  and  the  President  on  any  activities  which 
appear  to  be  illegal  or  improper.  The  Board  will  also  review  the  prac- 
tices, procedures,  and  internal  guidelines  of  the  various  IGs  and  Gen- 
eral Counsels  to  ensure  that  they  are  designed  to  bring  questionable 
activities  to  light.  Finally,  the  Board  will  see  to  it  that  intelligence 
community  IGs  and  General  Counsels  have  access  to  any  information 
they  require. 

The  President's  Intelligence  Oversight  Board  should  serve  a  useful 
purpose.  However,  the  ability  of  a  small,  part-time  Board  to  monitor 
the  activities  of  the  entire  intelligence  community  is  questionable. 
Further,  the  Board  is  a  creature  of  the  Executive  and,  as  such,  may 
be  unable  or,  at  times,  unwilling  to  probe  certain  sensitive  areas.  A 


65 

body  independent  of  the  Executive  must  also  be  responsible  for  moni- 
toring the  activities  of  the  intelligence  community,  including  those 
which  may  be  either  illegal  or  improper. 

E.  Allocating  Intelligence  Kesources 

1.  Role  of  0MB 

The  Office  of  Management  and  Budget  (0MB)  is  the  principal  staff 
arm  of  the  President  for  supervising  the  Federal  budget.  OMB  is  also 
a  staff  arm  for  management — a  tool  the  President  occasionally  uses  to 
reorganize  or  redirect  the  structure  and  activities  of  the  Federal 
Government. 

In  managing  U.S.  intelligence  activities,  the  President  has  used 
OMB  to  pull  together  his  annual  intelligence  budget  and  also  to  moni- 
tor the  expenditure  of  intelligence  funds.  For  example,  OMB  annually 
reviews  the  intelligence  community's  appropriations  requests  and 
makes  its  recommendations  to  the  President  for  amounts  to  be  included 
in  his  budget.  Further,  OMB  apportions  ^^  CIA's  appropriation  and 
has  authority  to  approve  releases  from  the  CIA  Contingency  Reserve 
Fund. 

The  fiscal  management  responsibility  of  OMB  has  been  especially 
critical  in  the  field  of  intelligence.  Intelligence  activities  comprise  a 
large  part  of  that  small  and  shrinking  portion  of  the  federal  budget 
which  is  "controllable."  ^^  About  75  percent  of  federal  spending  for 
fiscal  1976  was  designated  in  the  President's  budget  submission  as 
"uncontrollable."  The  Committee  has  found  that  the  direct  cost  of  na- 
tional intelligence  spending  is  currently  [deleted]  and  total  intelli- 
gence spending  is  approximately  twice  that.  Thus  the  total  U.S.  intel- 
ligence budget  is  about  [deleted]  percent  of  federal  spending,  but  is 
[deleted]  percent  of  controUable  federal  spending.  Because  the  U.S. 
intelligence  budget  is  fragmented  and  concealed,  the  relationship  be- 
tween controllable  intelligence  program  sand  controllable  federal 
spending  has  never  been  shown  to  Congress  in  the  President's  budget. 
OMB  has  been  a  principal  point  at  which  the  President  can  identify 
and  exert  management  leverage  over  this  aggregate  of  controllable 
funds. 

Over  the  years,  OMB  (and  its  predecessor,  the  Bureau  of  the 
Budget)  has  had  the  greatest  management  impact  when : 

— It  has  been  used  as  an  instrument  of  presidential 
reorganization ; 

— It  has  identified  major  issues  for  the  President,  usually 
involving  bids  by  intelligence  agencies  to  maintain  or  launch 
duplicative  or  marginally  useful  programs. 

For  example,  in  1960  President  Eisenhower  commissioned  the  Bud- 
get Bureau  to  establish  a  Joint  Study  Group  of  the  principal  intel- 


^  "Apportionment"  of  funds  is  described  by  bndgcetary  statutes  as  the  OMB 
action,  following  congressional  appropriations,  whereby  agencies  receive  formal 
notification  of  amounts  appropriated  and  the  distribution  of  spending  by  time 
period  and  program. 

*°  Defined  as  spending  that  is  not  predetermined  by  statute,  such  as  Interest 
on  the  federal  debt,  veterans  benefits.  Social  payments,  et  cetera. 


66 

licence  agencies  to  take  a  hard  look  at  U.S.  intelligence  collection 
requirements  and  other  problems.  In  its  report,  the  Joint  Study  Group 
recommended  to  the  President  a  variety  of  measures  to  strengthen 
intelligence  management,  including  a  more  assertive  role  for  the  DCI, 
stronger  control  by  NSA  of  the  cryptologic  agencies,  and  centralized 
management  of  collection  requirements. 

A  decade  later.  President  Nixon  commissioned  OMB  to  probe  the 
management  of  the  intelligence  community,  and  to  determine  what 
changes,  short  of  legislation,  might  be  made.  An  ensuing  report  by 
Assistant  OMB  Director  James  Schlesinger  concluded  that  the  divi- 
sion of  labor  envisaged  by  the  National  Security  Act  of  1947  had  been 
rendered  obsolescent  and  meaningless  by  technology  and  the  ambitions 
of  U.S.  intelligence  agencies.  The  Schlesinger  Report  recommended 
nothing  less  than  the  basic  reform  of  U.S.  intelligence  management, 
centering  upon  a  strong  DCI  who  could  bring  intelligence  costs  under 
control  and  bring  intelligence  production  to  an  adequate  level  of  qual- 
ity and  responsiveness.  In  addition,  the  OMB  report  pointed  to  nine 
specific  mergers  or  shifts  of  intelligence  programs  estimated  to  save 
nearV  one  billion  dollars  annually. 

OMB  has  also  been  an  occasional  lightning  rod  for  the  identification 
of  specific  budget  or  management  issues.  In  the  mid-sixties  the  Bureau 
of  the  Budget  called  the  President's  attention  to  the  problems  of  better 
coordinating  the  costs  and  benefits  of  overhead  reconnaissance.  Fur- 
ther, the  Bureau  pressed  hard  for  a  reorganization  of  Defense  map- 
ping and  charting  activities  emphasizing  the  issues  of  needless  dupli- 
cation of  service  mapping  agencies.  This  was  resolved  following  the 
Schlesinger  Report. 

2.  Recent  Trends  and  Programs 

OMB  reportedly  was  given  a  major  role  in  developing  the  recom- 
mendations presented  to  President  Ford  for  overhauling  intelligence 
budgeting  and  management.  If  this  was  the  case,  it  would  reverse  a 
recent  trend.  Since  1971,  OMB's  day-to-day  influence  upon  intelligence 
management  has  been  at  a  low  point.  OMB  has  been  confined  to  its 
cyclical,  institutional  role  in  the  budget  process.  The  strengths  and 
weaknesses  of  this  role  will  be  discussed  below. 

3.  OMB  Role  in  Formulating  the  Budget 

OMB  can  always  get  the  President's  attention  in  recommending 
what  should  be  included  in  his  annual  budget  proposals  to  Congress. 
Associated  with  OMB  budget  recommendations  is  the  identification 
of  major  resource  allocation  issues,  with  an  analysis  of  options  and 
a  recommended  course  of  action.  However,  OMB  recommendations  on 
intelligence  have  had  less  presidential  acceptance  than  in  other  areas  of 
the  federal  budget.  This  has  been  due  to  the  difficulty  of  carrying  any 
"military"  budget  issue  opposed  by  the  Secretary  of  Defense  and  the 
relative  ineffectiveness  of  DCI  support.  Further,  OMB  is  excluded 
from  some  of  the  early,  formative  stages  of  DOD  program  determina- 
tions for  intelligence  which  cover  eighty  percent  of  the  intelligence 
budget. 


67 

For  the  past  three  years,  with  OMB  encoiirao;ement,  the  DCI  has 
provided  the  President  with  his  own  recommendations  for  the  national 
intelligence  budget.  Unfortunately,  these  have  come  too  late  in  the 
process  to  have  much  impact.  These  recommendations  have  followed, 
not  preceded,  DOD  submissions  to  OMB  and  OMB's  own  formative 
stages  of  analysis. 

The  President's  annual  and  five-year  planning  targets  are  an  inte- 
gral part  of  the  federal  budget  process.  Federal  agencies  are  adjured 
to  fit  their  fiscal  and  staffing  plans  within  the  presidential  targets,  with 
special  emphasis  upon  the  nearest  or  "budget"  year.  Presidential  tar- 
gets are  especially  important  in  their  potential  for  strengthening  cen- 
tral management  of  the  intelligence  community.  The  DCI  has 
recognized  this.  These  targets  can  assist  the  DCI  in  getting  more  value 
for  the  intelligence  dollar.  However,  OMB  has  issued  the  planning 
targets  too  late  in  the  planning  process  and  without  any  in-depth 
coordination  of  totals  and  major  components  with  the  DCI.  By  the 
time  the  DCI  and  CIA  have  received  their  target  figures  in  June  or 
July,  most  of  the  major  decisions  on  budget  request  levels  and  future 
year  implications  have  already  been  agreed  to  within  Defense  and 
CIA.  This  type  of  problem  is  widespread  in  the  federal  budget  process 
but,  because  of  the  insulation  of  intelligence  from  external  checks  and 
balances,  the  problem  is  especially  serious  in  intelligence  budgeting. 

The  problem  is  exacerbated  by  OMB's  issuance  to  the  Department 
of  Defense  of  a  planning  target  which  has  the  effect  of  constituting  an 
alternative  planning;  base  for  intelligence.  This  target  has  not  been 
directly  related  to  DOD's  intelligence  budget.  The  Secretary  of  De- 
fense has  been  given,  in  effect,  a  choice  between  a  level  of  intelligence 
spending  consistent  with  the  DCI's  planning  target  and  one  which 
matches  his  own  view  of  overall  DOD  priorities  and  claims.  Not  sur- 
prisinglv,  Secretaries  of  Defense  have  tended  to  opt  for  the  latter.  The 
result,  therefore,  of  the  two  planning  targets  has  made  the  DCI's 
management  mandate  all  the  harder  to  fulfill. 

Jf,.  Presidential  Budget  Decisionmaking 

OMB's  budaret  recommendations  to  the  President,  which  culminate 
OMB's  annual  budget  review,  have  been  the  only  comprehensive  pres- 
entations of  United  States'  intelligence  spending.  These  serve  to  high- 
light major  issues  and  are  done  by  analvsts  independent  of  any  intelli- 
gence agency.  In  contrast  with  the  DCI's  national  intelligence  budget 
presentation,  which  excludes  future  year  figures  and  does  not  have 
the  Secretary  of  Defense's  recommended  amounts,  the  OMB  presenta- 
tion is  complete  and  based  upon  each  agency's  final  positions.  More- 
over, the  OlSIB  presentation  offers  specific  solutions  to  the  President's 
problem  of  restraining  intelligence  spending  without  degrading 
intelligence  operations. 

These  presentations  and  those  related  to  the  DCI's  National  Foreign 
Intelligence  Budaret  are  not  shared  with  Congress.  Therefore,  except 
for  selective  briefings  bv  the  DCI  and  individual  program  managers, 
Congress  has  not  been  informed  of  the  major  options  at  stake  in  the 
President's  budget. 


68 

6.  ApportionTnent  and  Budget  Execution 

0MB  apportionment  of  appropriated  funds  is  the  source  of  much 
of  OMB's  muscle  in  budget  execution.  By  law  (31  U.S.C.  665),  federal 
agencies  cannot  use  appropriated  funds  in  the  absence  of  an  0MB 
apportionment.  The  apportionment  can  convey  the  funds  in  lump  sum, 
distributed  by  quarter,  or  by  major  program.  0MB  can  impose  set- 
asides  and  can  call  special  hearings.  With  regard  to  intelligence  pro- 
grams, however,  OMB  apportionment  action  is  weak  and  f raarmented. 
The  only  direct  intelligence  apportionment  by  OMB  is  to  CIA — i.e., 
those  earmarked  amounts  of  the  DOD  appropriation  which  are  trans- 
ferred from  Defense  to  CIA  under  authority  of  the  Central  Intelli- 
gence Agency  Act  of  1949.  This  apportionment  is  done  in  lump  sum. 
The  rest  of  the  intelligence  budget  is  scattered  among,  and  apportioned 
by,  some  20  DOD  appropriations  and  an  appropriation  to  State  with- 
out a  distinction  made  for  intelligence  funds.  Thus,  OMB  apportion- 
ment is  procedurally  applied  to  less  than  20  percent  of  the  annual 
national  intelligence  budget  and  to  less  than  10  percent  of  total  intel- 
ligence spending. 

Another  weakness  of  OMB's  ability  to  monitor  budget  execution  is 
its  procedural  blindness  to  advances,  renrogramming,  and  managment 
of  intelligence  proprietary  activities.  Other  weaknesses  include: 

— A  large  proportion  of  funds  spent  for  CIA  covert  action  projects 
have  come  from  Defense  Department  advances,  under  authority  of 
the  Economy  Act,  and  therefore  are  outside  OMB  apportionment. 

— OMB  does  not  rontinelv  receive  notice  of  maior  reprogramming  of 
CIA  funds  from  activities  shown  and  justified  in  the  congressional 
budget.  The  premium  upon  exploitation  of  unforeseen  intelliflrence 
opportunities  puts  a  premium  upon  budgeting  flexibilitv.  Yet  OMB 
lacks  a  set  of  benchmarks  to  determine  routinely  when  CIA  or  other 
intelligence  agencies  have  substantially  departed  from  the  approved 
budget. 

It  appears  that  more  than  half  oi  nil  larp-e-scale  covprt  action  proj- 
ects initiated  in  the  period  1961-76  did  not  come  to  OMB  for  review. 

6.  Ahsence  of  GAO  Audits 

The  absence  of  GAO  audits  in  the  intelliarence  community  affects 
OMB's  ability  to  monitor  intelligence  performance.  In  other  federal 
areas  GAO  audits  often  include  an  evaluation  of  iierformance  effec- 
tiveness and  economy,  as  well  as  compliance.  OMB  has  a  standing 
arrangement  to  follow  up  with  aorencies  on  GAO  audits.  GAO  audits 
often  provide  launching  points  for  OMB  investigations  or  reinforce 
OMB  interests  in  broader  problems.  The  absence  of  such  independent 
and  critical  GAO  reports  in  the  intelligence  field  weakens  both  OMB 
and  congressional  oversight. 

7.  OMB  Representation!  07i  Excom  ** 

The  process  of  planning  and  budqfeting  for  overhead  reconnaissance 
is  new  enough  to  have  escaped  historic  overlaps  of  jurisdiction  afflict- 

''  This  EXCOM  was  abolished  as  a  result  of  President  Ford's  recent  Executive 
Order.  It  is  likelv  that  a  similar  body  will  be  re-established  under  the  direction 
of  the  new  Committee  on  Foreign  Intelligence. 


69 

ing  the  rest  of  the  intelligence  community.  An  Executive  Committee 
(EXCOM)  wiis  established  to  coordinate  reconnaissance  develop- 
ment and  planning,  chaired  by  the  DCI  with  the  Assistant  Secretary 
of  Defense  for  intelligence  as  the  other  memlber.  While  0MB  was  not  a 
member  of  EXCOM,  it  had  a  representative  at  EXCOM  meetings. 
EXCOM  decisions  often  were  a  compromise  between  the  DCI  and  the 
Depar'tment  of  Defense  which  may  or  may  not  have  represented  the 
most  cost-effective  solution.  On  occasion,  the  0MB  representative  took 
a  role  in  defining  options  and  insisting  upon  analysis  of  key  points. 
Here  is  one  area  of  intelligence  budgeting  where  0MB  was  actively 
represented  and  therefore  in  a  position  to  help  the  President  identify 
and  resolve  large  issues. 

8.  Net  Assessment  of  0MB  Role  in  Intelligence  Management 

OMB's  cyclical  role  in  the  budget  process  has  the  strengths  and 
weaknesses  noted.  Recognizing  that  0MB  has  statutory  authority  in 
budget  preparation  and  ap])ortionment  of  funds,  it  is  nevertheless 
true  that  the  key  to  0MB  influence  for  management  improvement  is 
the  extent  to  whic'h  the  Preident  chooses  to  use  and  back  0MB  for 
specific  projects.  OMB's  role  ought  to  be  at  its  strongest  in  the  intelli- 
gence community,  given  the  absence  of  public  scrutiny  and  checks  and 
balances  which  operate  in  other  federal  program  areas. 

The  Committee  notes  several  trends  in  intelligence  budgeting 
and  management  which  indicate  an  increasing  need  for  strong  and 
objective  0MB  staff  assitance  to  the  President:  first,  intelligence 
spending  has  increased  significantly  in  the  last  decade.  There  are  pres- 
sures for  further  growth ;  second,  as  already  noted,  intelligence  is  one 
of  the  few  "controllable"  program  areas  of  a  federal  budget;  third, 
the  results  of  intelligence  spendinsr  do  not  seem  to  be  commensurate 
with  the  increases  in  outlavs.  Inflation  partly  explains  this.  Since  1969 
the  real  value  of  goods  and  services  available  to  intelligence  has  been 
reduced  by  an  estimated  twentv  i">ercent.  Inflation  is  not  a  full  ex- 
planation, however.  Ris^idities  in  the  intellip-ence  budsret  protect  each 
manager's  share,  at  the  cost  of  nerpe^^uatino:  less  nroductive  or  dunli- 
cative  programs.  The  result  is  that  ceilino-s  on  the  intelligence  budget 
are  permitted  to  drive  out  long-term  improvements  in  economy  and 
effectiveness.  Fourth,  there  is  a  fragmentation  of  management  au- 
thoritv  in  the  intelligence  communitv.  The  DCI  has  had  successive 
nresidential  mandates  to  mauporp.  \^y^\^^  j^^s  been  handicapped  by  the 
lark  of  co?itrol  of  intellijrence  dollars. 

In  tbe  face  of  such  a  challeno-e.  t^^e  nature  of  future  presidential 
maTidates  to  OAfB  could  be  imno^tnut  to  both  executive  and  conores- 
sioual  ovPT-qio-ht,  In  anv  futurp  detoi-minatimi  to  strenp-then  Ol^TB's 
role,  it  will  be  necessary  to  enlarge  the  staff  of  the  six-person  0MB 
intellifi-enceunit. 

9.  OMB^s  Bole  as  Affected  Tyti  the  Presidsnfs  Recent  Executiaie  Order 
In  his  Executive  Order  of  February  18.  President  Ford  strensfth- 

ened  OMB's  role  in  intelli.frence  management  in  two  principal  ways: 
First.  OMB  has  been  mndp  an  observpr  to  the  Onprations  Advisory 
Group,  successor  to  the  40  Committee.  This  step  will  likely  give  OMB 


70 

a  regular  and  timely  scriitinv  of  all  proposed  covert  action  and  other 
sensitive  intelligence  projects.  OMB's  review  will,  therefore,  no  longer 
be  confined  to  a  postdecision  review  of  those  projects  requiring  Con- 
tingency Reserve  Fund  financing.  Another  likely  effect  is  to  strengthen 
the  substantive  mandate  of  OMB's  inquiry  into  CIA  projects  of  all 
kinds. 

Second,  the  President  has  given  the  DCI  a  more  direct  influence 
on  the  national  intelligence  budget  by  requiring  that  the  new  Com- 
mittee on  Foreign  Intelligence  ( CFI ) .  which  is  headed  by  the  DCI. 
"shall  control  budget  preparation  and  resource  allocation  for  the  Na- 
tional Foreisn  Intelligence  Program."  Further,  the  President  requires 
that  the  CFI  ''shall,  pri&r  to  suhmission  to  the  Oifiee  of  Management 
and  Budget,  review,  and  amend  as  it  deems  appropriate,  the  budget 
for  the  National  Foreign  Intelligence  Prosfram."  [Emphasis  added.] 

The  combined  effect  of  these  two  changes  would  appear  to 
strengthen  OMB's  review  role.  The  directive  appears  to  tackle  the  prob- 
lem of  the  weak  and  ill-timed  impact  of  DCI  review :  it  also  puts  0MB 
in  the  position  of  evaluating  the  analyses  and  proposals  of  both  the 
CFI  and  the  intelligence  agencies  on  the  way  to  the  President. 

The  managerial,  faws  in  the  President's  Executive  Order  are  these : 

1.  The  President's  directive  that  "neither  the  DCI  nor  the  CFI  shall 
have  responsibility  for  tactical  intelligence''  exempts  what  may  be  one 
of  the  largest  and  managerially  vulnerable  areas  of  intelligence  from 
national  manasrement  and  beneficial  tradeoffs.  It  gives  Defense  a  dodsre 
that  could  defeat  future  DCI  and  0MB  management  efforts.  By  fail- 
ing to  make  the  distinction  between  operational  control  of  intelligence 
organic  to  military  units  and  management  overview  (i.e..  maintenance 
of  DCI ''CFI  data  base,  continuing  overview,  and  occasional  initia- 
tives) .  the  President's  directive  may  have  undercut  much  of  the  DCI/ 
0MB  managerial  clout.^* 

2.  The  silence  of  the  Executive  Order  on  execution  of  the  intelli- 
gence budget  fails  to  mandate  CFI  and  0MB  apportionment  of  fimds 
appropriated  for  intelligence  and  GAO  audit.  The  Order  does  give 
the  CFI  authority  to  control  "resource  allocation.'"  If  this  is  inter- 
preted to  mean  a  svstem  of  centralized  CFI  apportionment  via  O^IB. 
executive  oversight  of  national  intelligence  programs  could  be 
strengthened.  The  meaning  of  these  words  in  the  Executive  Order 
therefore  deserves  probing. 

3.  The  actual  authority  of  the  DCI  in  the  new  Committee  on  Foreiqm 
Intelligence  mav  not  be  very  strong  in  practice  because  the  Executive 
Order  does  nothinor  about  the  pattern  of  intelligence  anpronrintions. 
Defense  still  receives  eighty  percent  of  the  national  intelligence 
bud.o^et.  The  Order  recognizes  the  Secretary  of  Defense  as  responsible 
for  directinsr.  funding,  and  operatinor  "XSA  and  national,  defense,  and 
military-  intellisrence  and  reconnaissance  activities  as  renuired."  The 
Secretary  of  Defense  remains  the  "executive  agent  of  the  U.S.  Govern- 
ment"' for  sififnals  intelligence.  In  view  of  these  formidable  DOD  pow- 
ers, the  CFI  may  be  dominated  by — or  at  least  subject  to  the  veto  of — 
the  Department  of  Defense. 


**  See  Coneressional  study,  Congressional  Oversight  of  the  Intelliegnce  Budget, 
Parts  I  and  II. 


V.  THE  DIRECTOK  OF  CENTRAL  INTELLIGENCE 

Issues 

In  Januarj^  1946,  President  Truman  established  by  Presidential 
Directive  the  National  Intellig:ence  Authority  under  the  direction  of 
the  Director  of  Central  Intelligence  (DCI).  The  Directive  authorized 
the  Director  of  Central  Intelligence  to  plan,  develop  and  coordinate 
the  foreign  intelligence  activities  of  the  United  States  Government.^ 
That  same  year,  the  Joint  Congressional  Committee  on  the  In- 
vestigation of  the  Pearl  Harbor  Attack  described  how  the  military- 
sen-ices  in  Washington  had  failed  to  bring  all  the  intelligence  to- 
gether about  Japanese  plans  and  intentions  and  then  concluded  that 
"operational  and  intelligence  work  requires  centralization  of  authority 
and  clear-cut  allocation  of  responsibility.''  ^ 

Subsequentlv,  in  1947,  Congress  passed  the  National  Security  Act 
giving  the  DCI  responsibility  for  "coordinating  the  intelligence  ac- 
tivities of  the  several  Government  departments  and  agencies  in  the 
interest  of  national  security."'  ^  Concurrently,  the  President  designated 
the  Director  of  Central  Intelligence  as  his  principal  foreign  intelli- 
gence adviser  and  established  an  Intelligence  Ad"vison'  Committee 
(later  reconstituted  as  the  United  States  Intelligence  Board)  to  "ad- 
vise'' the  DCI  in  carrv'ing  out  his  responsibilities.* 

The  precise  roles  and  responsibilities  of  the  DCI.  however,  were  not 
clearly  spelled  out.  For  fear  of  distracting  attention  from  the  principal 
objective  of  the  1947  National  Security  Act — to  unify  the  armed 
services — the  TThite  House  did  not  delineate  the  DCI's  functions  in 
anv  detail.^  The  Congressional  debates  also  failed  to  address  the  extent 


'  Presidential  Directive.  1/22/46.  Federal  Register.  Vol.  II.  pp.  1337.  1339. 

^  Joint  Committee  on  the  Investigation  of  the  Pearl  Harbor  Attack,  Report, 
pursuant  to  S.  Con.  Res.  27.  7/20/46.  79th  Cong..  2nd  Sess..  p.  254. 

'  Section  102.  National  Security  Act  of  1947.  61  Statutes-at-large  497-499.  Pro- 
visions of  Section  102  are  codified  at  50  U.S.C.  403. 

*  National  Security  Council  Intelligence  Directive  (NSCID)  Xo.  1.  12/12/47. 
The  Intelligence  Advisory  Committee  was  chaired  by  the  DCI.  and  was  composed 
of  representatives  from  the  Departments  of  State.  Army,  Navy,  and  Air  Force, 
the  Joint  Chiefs  of  Staff,  and  the  Atomic  Energy  Commission.  In  1957,  the  Presi- 
dent's Foreign  Intelligence  Advisory  Board  recommended  that  the  IntelUgenco 
Advisory  Committee  be  merged  with  the  United  States  Communications  Intelli- 
gence Board  to  perform  the  overall  intelligence  coordinating  function  more  ef- 
fectively. Consequently,  the  United  States  Intelligence  Board  (USIB)  was  estab- 
lishPd  in  1958. 

Under  President  Ford's  Executive  Order  Xo.  11905,  2/18/76.  USIB  was  dis- 
solved, but  the  DCI  was  given  responsibility  to  "establish  such  committees  of  col- 
lectors, producers  and  users  of  intelligence  to  assist  in  his  conduct  of  his  respon- 
sibilities." 

^  Draft  Legislative  History  of  the  CIA,  prepared  by  the  Ofl5ce  of  Legislative 
Counsel,  CIA.  .July.  1967;  and  Organizational  History  of  CIA,  1950-1953,  pre- 
pared by  the  CIA,  p.  27. 

(71) 


72 

of  DCI  authority  over  the  intelligence  community.  Rather,  congres- 
sional committees  were  interested  in  whether  the  DCI's  primary 
responsibility  would  be  to  the  military  services  or  whether  he  would 
report  directly  to  the  National  Security  Council  (NSC)  and  the 
President.*^  But  the  problems  facing  the  DCI  were  obvious  from  the 
beginning.  According  to  a  1948  memorandum  by  the  CIA's  General 
Counsel : 

In  its  performance  of  the  intelligence  functions  outlined 
in  the  National  Security  Act,  the  primary  difficulty  exper- 
ienced by  CIA  has  been  in  certain  weakness  of  language 
in  paragraph  102(d)  concerning  the  meaning  of  coord- 
ination of  intelligence  activities.  Where  the  Act  states  "it 
shall  be  the  duty  of  the  Agency  ...  to  advise  the  National 
Security  Council  .  .  .  [and]  to  make  recommendations  to  the 
National  Security  Council  for  the  coordination  of  such  intel- 
ligence activities,"  it  has  been  strongly  argued  that  this  places 
on  the  Director  a  responsibility  merely  to  obtain  cooperation 
among  the  intelligence  agencies.  This  weakness  of  language 
and  the  ensuing  controversy  might  have  been  eliminated  by 
the  insertion  after  the  phrase  "it  shall  be  the  duty  of  the 
Agency,"  the  following  words:  "and  the  Director  is  hereby 
empowered,"  or  some  other  such  phrase  indicating  the  intent 
of  Congress  that  the  Director  was  to  have  a  controlling  voice 
in  the  coordination,  subject  to  the  direction  of  the  National 
Security  Council.^ 

Under  Senate  Resolution  21,  the  Select  Committee  has  undertaken 
for  the  first  time  since  1947  a  studv  of  the  manner  in  which  the 
successive  Directors  of  Central  Intelligence  have  carried  out  their 
responsibilities,  in  an  effort  to  determine:  (1)  whether  the  DCI's 
assigned  responsibilities  are  proper  and  sufficient;  (2)  whether  the 
DCI  has  sufficient  authority  to  carry  out  these  responsibilities;  (3) 
whether  the  DCI  should  continue  as  Director  of  the  Central  Intelli- 
gence Agency,  if  he  is  to  play  a  leadership  role  for  the  entire  intelli- 
gence comnnmity;  and  (4)  whether  Congress  should  enact  more 
explicit  or  different  definitions  of  the  DCI's  responsibilities. 

*  Hearings  before  the  Senate  Armed  Services  Committee  on  S.  758,  pp.  173-176, 
and  Hearing's  before  the  House  Clommittee  on  Expenditures  in  the  Executive 
Departments  on  H.R.  2139  (1947).  During  the  House  hearings,  Representative 
Hale  Boggs  commented : 

"I  can  see  .  .  .  even  if  this  biU  becomes  law,  as  pre«entlv  set  up,  a  great  deal  of 
room  for  confusion  on  intelligence  matters.  Here  we  have  the  Director  of  the 
Central  Intelligence  Agency,  responsible  to  the  National  Security  Council,  and 
yet  the  Director  is  not  a  member  of  that  Council,  but  he  has  to  get  all  of  his 
information  down  through  the  chair  of  the  Secretary  of  National  Defense,  and 
all  the  other  agencies  of  Government  in  addition  to  our  national  defense  agencies. 
.  .  .  I  juH  cnnnot  quite  ace  how  the  man  is  fioino  to  carry  out  his  functions 
there  without  a  great  deal  of  confusion,  and  really  more  opportunity  to  put  the 
blame  on  somebody  else  than  there  is  now." 

Secretary  of  the  Navy  James  Forrestal  replied  : 

"Well,  if  you  have  an  organization.  Mr.  Boges,  in  which  men  have  to  rely 
unon  placing  the  blame,  .  .  .  you  cannot  run  any  orsranization.  and  it  goes  to 
the  root  really  of  this  whole  question.  This  thing  will  work,  and  I  have  said 
from  the  begmning  it  would  only  work,  if  the  components  tvant  it  to  work." 
[Emphasis  added.] 

■^  Memorandum  from  Lawrence  R.  Houston  to  the  Director,  5/7/48. 


73 

Introduction 

The  Pearl  Harbor  intelligence  failure  was  the  primary  motivation 
for  establi?hinor  a  Director  of  Central  Intelligence.  President  Truman 
desired  a  national  intelligence  organization  which  had  access  to  all 
information  and  would  be  headed  by  a  Director  who  could  speak  au- 
thoritatively for  the  whole  community  and  could  insure  that  the  com- 
munity's operation  served  the  foreign  policy  needs  of  the  President  and 
his  senior  advisers.*  President  Truman  and  subsequent  Presidents  have 
not  wanted  to  rely  exclusively  on  the  intelligence  judgments  of  depart- 
ments with  vested  interests  in  applying  intelligence  to  support  a  partic- 
ular foreign  policy  or  to  justify  acquiring  a  new  weapons  system. 

However,  the  DCI's  responsibility  to  produce  national  intelligence 
and  to  coordinate  intelligence  activities  has  often  been  at  variance  with 
the  particular  interests  and  prerogatives  of  the  other  intelligence 
community  departments  and  agencies.  During  the  Second  World  War, 
the  Department  of 'State  and  the  military  services  developed  their  own 
intelligence  operations.  Despite  establishment  of  the  Director  of  Cen- 
tral Intelligence  in  1946,  they  have  not  wanted  to  give  up  control  over 
their  own  intelligence  capabilities.  The  military  services  particularly 
have  argued  that  they  must  exercise  direct  control  over  peacetime  intel- 
ligence activities  in  order  to  be  prepared  to  conduct  wartime  military 
operations.  The  State  and  Defense  Departments  have  steadfastly  op- 
posed centralized  management  of  the  intelligence  community  under 
the  DCI. 

However,  over  time  the  actual  degree  of  conflict  between  the  DCI's 
responsibility  to  coordinate  intelligence  activities  and  the  interests  of 
the  other  parts  of  the  community  has  depended  on  how  broadly  each 
DCI  chose  to  interpret  his  coordination  responsibilities  and  how  he 
allocated  his  time  between  his  three  major  roles.^  The  three  roles  the 
DCI  plays  are:  (1)  the  producer  of  national  intelligence;  (2)  the 
coordinator  of  intelligence  activities;  and  (3)  the  Director  of  the  Cen- 
tral Intelligence  Agency. 

A.  The  Producer  of  National  Intelligence 

As  the  President's  principal  foreign  intelligence  adviser,  the  DCI's 
major  responsibility  is  to  produce  objective  and  independent  national 

^  Harry  S.  Truman,  Mffmoirs,  Vol.  II,  p.  58. 

"  Question  :  When  you  were  DCI,  did  you  ^'epl  tbat  institutionally  or  functionally 
your  position  was  bumping  heads  with  the  DOD  intelligence  apparatus  in  different 
ways  or  not,  and  if  not,  why  not,  in  view  of  the  structufe? 

Mr.  Schlesinger:  Well,  historically  there  hav^  been  intervening  periods  of 
open  warfare  and  detente  . . .  Prior  to  these,  one  of  the  problems  of  the  intelligence 
community  has  been  the  warfare  that  exists  along  jurisdictional  boundaries,  and 
this  tended  to  erupt  in  the  period  of  the  1960's,  in  particular  when  they  were 
inti'oducing  a  whole  set  of  new  technical  collection  capabilities  ;  that  open  warfare 
was  succeeded  by  a  period  of  true  detente,  but  the  problem  w-ith  such  detente  is 
that  it  tends  to  be  based  on  marriage  contracts  and  the  principle  of  good  fences 
make  good  neighbors,  and  that  a  mutual  back-scratching  and  the  like,  so  that 
you  do  not  get  effective  resource  management  under  those  circumstances.  (James 
Schlesinger,  testimony,  2/2/76,  pp.  29-30.) 


69-983  O  -  76  -  6 


74 

intelligence  for  senior  policymakers.^"  In  so  doing,  he  draws  on  a 
variety  of  collection  methods  and  on  the  resources  of  the  departmental 
intelligence  organizations  as  well  as  CIA  analysts."  But  the  DCI 
issues  national  intelligence  and  is  alone  responsible  for  its  production.^^ 

The  most  important  national  intelligence  which  the  DCI  produces 
is  the  National  Intelligence  Estimate  (NIE).  An  NIE  presents  the 
intelligence  community's  current  knowledge  of  the  situation  in  a 
particular  country  or  on  a  specific  topic  and  then  tries  to  estimate  what 
is  going  to  happen  within  a  certain  period  of  time.  NIEs  are  prepared 
for  use  by  those  in  the  highest  policy  levels  of  government  and  rep- 
resent the  considered  judgment  of  the  entire  community.^^  Major 
differences  of  opinion  within  the  intelligence  community  are  illumi- 
nated in  the  text  or  in  the  footnotes.  Wlien  an  NIE  is  released,  however, 
it  is  the  DCI's  own  national  intelligence  judgment,  in  theory  free  from 
departmental  or  agency  biases." 

To  carry  out  this  responsibility  to  produce  independent  and  objec- 
tive national  intelligence,  DCI  Walter  Bedell  Smith  established  the 
Board  of  National  Estimates  in  1950.  The  Board  was  comprised  of 
senior  government  officials,  academicians  and  intelligence  officers  and 
had  a  small  staff  known  as  the  Office  of  National  Estimates  (ONE). 
One  member  of  the  Board  would  be  responsible  for  supervising  the 
drafting  of  the  estimates  by  the  ONE  staff,  for  reviewing  these  judg- 
ments collectively  for  the  DCI,  and  for  adjudicating  disputes  within 
the  community.  When  the  United  States  Intelligence  Board  reviewed 
an  NIE,  the  DCI  could  have  confidence  in  the  opinions  expressed  in 
the  estimate  because  each  estimate  reflected  the  collective  judgment  of 
his  own  Board.  According  to  the  former  chairman  of  the  Board  of 
National  Estimates,  John  Huizenga : 

The  Board  of  National  Estimates  in  fact  functioned  as  a  kind 
of  buffer.  It  provided  procedures  by  which  the  departmental 
views  could  be  given  a  full  and  fair  hearing,  while  at  the  same 
time  ensuring  that  the  DCI's  responsibilities  to  produce  in- 
telligence from  a  national  viewpoint  could  be  upheld.^^ 


^"According  to  NSCID  No.  1,  2/17/72.  national  intelligence  is  that  intelligence 
required  for  the  formulation  of  national  security  policy  and  concerning  more 
than  one  department  or  agency.  It  is  distinguished  from  departmental  intel- 
ligence, which  is  that  intelligence  in  support  of  the  mission  of  a  particular 
department. 

"Prior  to  President  Ford's  Executive  Order  No.  11 90.^;,  o/]s/7fi.  the  TTnited 
States  Intelligence  Board,  composed  of  representatives  from  the  various  agencies 
and  departments  of  the  intelligence  community,  formally  reviewed  the  DCI's 
na^^ional  intelligence  judgments. 

^  Under  President  Ford's  Executive  Order  No.  11905.  2/18/76.  the  DCI  will 
have  responsibility  to  "supervise  production  and  dissemination  of  national  intel- 
ligence." 

"At  present,  the  DCI  briefs  the  Congress  on  the  judgments  contained  in  his 
NIEs.  The  Congress  does  not  receive  the  DCI's  NIEs  on  a  regular  basis. 

"  In  his  role  as  CIA  Director,  the  DCI  also  produces  current  intelligence  and 
research  studies  for  senior  policymakers.  These  intelligence  judgments  are  pre- 
pared by  CIA  analysts  who  are  supposed  to  be  free  from  departmental  prefer- 
ences. Such  current  reporting  is  not  formally  reviewed  by  the  other  members  of 
the  intelligence  community,  but  is  often  informally  coordinated. 

^  John  Huizenga  testimony,  1/26/76,  p.  11. 


75 

In  1973,  Colby  replaced  the  Board  and  the  ONE  staff  with  a  new 
system  of  eleven  National  Intelligence  Officers  (NIOs).  Each  NIO  has 
staff  responsibility  to  the  DCI  for  intelligence  collection  and  produc- 
tion activities  in  his  geographical  or  functional  specialty.  The  NIOs 
coordinate  the  drafting  of  NIEs  within  the  community.  They  do  not, 
however,  collectively  review  the  final  product  for  the  DCI.^*^  Director 
Colby  testified  that  he  thought  the  Board  of  National  Estimates  tended 
to  fuzz  over  differences  of  opinion  and  to  dilute  the  DCI'S  final 
intelligence  judgments.^^ 

In  the  course  of  its  investigation,  the  Committee  concluded  that  the 
most  critical  problem  confronting  the  DCI  in  carrying  out  his  respon- 
sibility to  produce  national  intelligence  is  making  certain  that  Ms  in- 
telligence judgments  are  in  fact  objective  and  independent  of  depart- 
mental and  agency  biases.  However,  this  is  often  quite  difficult.  A  most 
delicate  relationship  exists  between  the  DCI  and  senior  policymakers. 
According  to  John  Huizenga : 

There  is  a  natural  tension  between  intelligence  and  policy, 
and  the  task  of  the  former  is  to  present  as  a  basis  for  the  de- 
cisions of  policymakers  as  realistic  as  possible  a  view  of  forces 
and  conditions  in  the  external  environment.  Political  leaders 
often  find  the  picture  presented  less  than  congenial.  .  .  . 
Thus,  a  DCI  who  does  his  job  well  will  more  often  than  not 
be  the  bearer  of  bad  news,  or  at  least  will  make  things  seem 
disagreeable,  complicated,  and  uncertain.  .  .  .  Wlien  intelli- 
gence people  are  told,  as  happened  in  recent  years,  that  they 
were  expected  to  get  on  the  team,  then  a  sound  intelligence- 
policy  relationship  has  in  effect  broken  down.^^ 

In  addition,  the  DCI  must  provide  intelligence  for  cabinet  officers 
who  often  have  vested  interests  in  receiving  information  which  sup- 
ports a  particular  foreign  policy  (State  Department)  or  the  acquisi- 


^"  Under  the  NIO  system,  the  Defense  Intelligence  Agency  fDIA)  and  the 
military  services  have  assumed  greater  responsibility  for  the  initial  drafting  of 
military  estimates.  Because  NIOs  have  no  separate  staff,  they  must  utilize  experts 
in  the  community  to  draft  sections  of  the  estimates.  In  1975,  DIA  prepared  the 
first  drafts  of  two  chapters  of  the  NIE  on  Soviet  offensive  and  defensive  strate- 
gic forces.  Colby  contends  that  as  a  consequence,  analysts  throughout  the  com- 
munity felt  more  involved.  (William  Colby  testimony,  12/11/75.) 

"  According  to  Colby  : 

"A  board?  You  say  why  don't  you  have  a  board  also?  I  have  some  reservation 
at  the  ivory  tower  kind  of  problem  that  you  get  out  of  a  board  which  is  too 
separated  from  the  rough  and  tumble  of  the  real  world.  I  think  there  is  a  tend- 
ency for  it  to  intellectualize  and  then  write  sermons  and  appreciations.   .   .   . 

"I  think  there  is  a  tendency  to  become  institutionally  committed  to  an  approach 
and  to  an  appraisal  of  a  situation  and  to  begin  to  interpret  new  events  against 
the  light  of  a  predetermined  approach  toward  those  events.  I  think  that  has  been 
a  bother.  I  like  the  idea  of  an  individual  total  responsibility,  one  man  or  woman 
totally  responsible,  and  then  you  don't  get  any  fuzz  about  how  there  was  a  vote, 
and  therefore  I  really  didn't  like  it  but  I  went  along  and  all  that  sort  of  thing, 
one  person  totally  responsible,  I  think,  is  a  good  way  to  do  it.  That  can  be  the 
Director  or  whatever  you  .set  up.  But  I  do  like  that  idea  of  separating  out  and 
making  one  individual  totally  re.spon.sible  so  there's  nobody  else  to  go  to,  and 
there's  no  way  of  dumping  the  responsibility  onto  somebody  else.  That  really 
is  my  main  problem  with  the  board,  that  it  diffuses  resi)onsibility,  that  it  does 
get  out  of  the  main  line  of  the  movement  of  material.  (Colby,  12/11/75,  pp.  36-37.) 

^  Huizenga,  1/26/76,  pp.  13-14. 


76 

tion  of  a  new  weapon  system  (Department  of  Defense).^''  The 
President  and  NSC  staff  want  confirmation  that  their  policies  are  suc- 
ceeding. Moreover,  each  NIE  has  in  the  past  been  formally  reviewed 
by  other  members  of  the  intelligence  community.  Although  CIA 
analysts  have  developed  expertise  on  issues  of  critical  importance  to 
national  policymakers,  such  as  Soviet  strategic  programs,  most  DCIs 
have  been  reluctant  to  engage  in  a  confrontation  with  members  of  the 
USIB  over  substantive  findings  in  national  intelligence  documents.^" 
According  to  John  Huizenga : 

The  truth  is  that  the  DCI,  since  his  authority  over  the  intel- 
ligence process  is  at  least  ambiguous,  has  an  uphill  struggle 
to  make  a  sophisticated  appreciation  of  a  certain  range  of 
issues  prevail  in  the  national  intelligence  product  over  against 
the  parochial  views  and  interests  of  departments,  and  espe- 
cially the  military  departments.^^ 

Finally,  the  DCI's  own  analysts  in  CIA  are  sometimes  accused  of 
holding  an  "institutional"  bias.  According  to  James  Schlesinger : 

The  intelligence  directorate  of  the  CIA  has  the  most  com- 
petent, qualified  people  in  it,  just  in  terms  of  their  raw  intel- 
lectual capabilities,  but  this  does  not  mean  that  they  are  free 
from  error.  In  fact,  the  intelligence  directorate  tends  to  make 
a  particular  type  of  error  systematically  in  that  the  intelli- 
gence directorate  tends  to  be  in  close  harmony  with  the  pre- 
vailing biases  in  the  intellectual  community,  in  the  univer- 
sity community,  and  as  the  prevailing  view  changes  in  that 
community,  it  affects  the  output  of  the  intelligence 
directorate,^^ 

In  particular,  CIA  analysts  are  sometimes  viewed  as  being  predis- 
posed to  provide  intelligence  support  for  the  preferences  of  the  arms 
control  community.  According  to  Schlesinger : 

For  many  years  it  was  said,  for  example,  that  the  Air 
Force  had  an  institutional  bias  to  raise  the  level  of  the  Soviet 
threat,  and  one  can  argue  that  in  many  cases  that  it  did  and 
that  was  a  consequence. 


"  According  to  Huizenga  : 

"It  should  be  recognized  that  the  approach  of  an  operating  department  to  intel- 
ligence issues  is  not  invariably  disinterested.  The  Department  of  State  sometimes 
has  an  interest  in  having  intelligence  take  a  certain  view  of  a  situation  because 
it  has  a  heavy  investment  in  an  ongoing  line  of  policy,  or  because  the  Secretary 
has  put  himself  on  record  as  to  how  to  think  about  a  particular  problem.  In  the 
Defense  Department,  intelligence  is  often  seen  as  the  servant  of  desired  policies 
and  programs.  At  a  minimum  there  is  a  strong  organizational  interest  in  seeing 
to  it  that  the  intelligence  provides  a  vigorous  appraisal  of  potential  threats.  It 
is  not  unfair  to  say  that  because  of  the  military  leadership's  understandable  de- 
sire to  hedge  against  the  unexpected,  to  provide  capabilities  for  all  conceivable 
contingencies  there  is  a  natural  thrust  in  military  intelligence  to  maximize 
threats  and  to  oversimplify  the  intentions  of  potential  adversaries.  It  is  also 
quite  naturally  true  that  military  professionals  tend  to  see  military  power  as  the 
prime  determinant  of  the  behavior  of  states  and  of  the  movement  of  events  in 
international  politics."  (Huizenga,  1/26/76,  pp.  11-12.) 

'"  Thid..  p.  11. 

"^  IMd.,  p.  12. 

^-Schlesinger,  2/2/76,  pp.  24-25. 


77 

But  there  developed  an  institutional  bias  amongst  the 
analytic  fraternity  which  ran  in  the  opposite  direction.  There 
was  an  assumption  that  the  Soviets  had  the  same  kind  of  arms 
control  objectives  that  they  wished  to  ascribe  or  persuade 
American  leaders  to  adopt,  and  as  a  result  there  was  a  steady 
upswing  of  Soviet  strategic  capabilities,  and  the  most  serious 
problem,  it  seems  to  me,  or  the  most  amusing  problem  devel- 
oped at  the  close  of  the  cycle  when  the  Soviets  had  actually 
deployed  more  than  1,000  ICBMs,  and  the  NIEs,  as  I  recall 
it,  were  still  saying  that  they  would  deploy  no  more  than  1,000 
ICBMs  because  of  the  prevailing  belief  in  the  intelligence 
analytic  fraternity  that  the  Soviets  would  level  off  at  1,000 
just  as  we  had. 

So  one  must  be  careful  to  balance  what  I  will  call  the 
academic  biases  amongst  the  analysts  with  the  operational 
biases  amongst  other  elements  of  the  intelligence  community.^^ 

Consequently,  on  the  occasions  when  the  DCI  does  support  his  own 
staff's  recommendations  over  the  objection  of  the  other  departments, 
the  objectivity  of  the  national  intelligence  product  may  still  be  under- 
mined by  the  bias  of  CIA  analysts. 

Recognizing  all  these  difficulties,  the  Select  Committee  has  investi- 
gated two  particularly  difficult  cases  for  Director  Helms  in  an  effort 
to  illustrate  the  problems  the  DCI  confronts  in  carrying  out  his  re- 
sponsibility to  produce  objective  and  independent  national  intelligence. 

During  the  summer  and  fall  of  1969,  the  White  House  and  then  the 
Secretary  of  Defense  indirectly  pressured  the  DCI  to  modify  his 
judgments  on  the  capability  of  the  new  Soviet  SS-9  strategic  missile 
system.  The  issues  under  debate  were:  (1)  whether  the  SS-9  was  a 
MIRV  (Multiple  Independently  Targeted  Re-entry  Vehicle)  missile; 
and  (2)  whether  the  Soviets  were  seeking  to  achieve  a  first  strike  ca- 
pability. The  intelligence  judgments  on  these  points  would  be  critical 
in  decisions  as  to  whether  the  ITnited  States  would  deploy  its  own 
MIRV  missiles  or  try  to  negotiate  MIRV  limitations  in  SALT  (the 
Strategic  Arms  Limitation  Talks),  and  whether  the  United  States 
would  deploy  an  Anti-Ballistic  Missile  (ABM)  system  to  protect  the 
United  States  Minuteman  missile  force  against  a  Soviet  first  strike. 

On  the  first  issue,  in  June  1969,  the  President's  Special  Adviser  for 
National  Security  Affairs,  Henry  Kissinger,  called  Director  Helms  to 
the  AVliite  House  to  discuss  an  estimate  on  Soviet  strategic  forces.  Kis- 
singer and  the  NSC  staff  made  clear  their  view  that  the  new  Soviet  mis- 
sile was  a  MIRV  and  asked  that  Helm's  draft  be  rewritten  to  provide 
more  evidence  sup]Dorting  the  DCI's  judgment  that  the  SS-9  had  not 
demonstrated  a  MIRV  capability.  In  response,  the  Chairman  of  the 
Board  of  National  Estimates  rewrote  the  draft,  but  he  did  not  change 
the  conclusion:  All  seven  tests  of  the  SS-9  were  MRVs  (Multiple  Re- 
entry Vehicles)  ;  they  were  certainly  not  independently  guided  after 

^  Schlesinger,  2/2/76,  pp.  26-27.  CIA  analysts  are  also  sometimes  accused  of 
being  biased  in  favor  of  the  clandestine  intellieence  collected  by  their  own  agency. 
This  charge  is  not,  however,  supported  by  a  CIA  study  of  what  kinds  of  reporting 
CIA  analysts  themselves  find  KEY  in  writing  their  intelligence  memoranda.  For 
FY  1974.  while  CIA  analysts  considered  clandestine  reporting  to  be  important, 
overt  State  Department  reporting  on  political  and  economic  subjects  was  cited 
more  frequently  as  KEY.  (Annual  DDI  Survey,  FY  1974.) 


78 

separation  from  the  launch  vehicle.^*  According  to  testimony  by  three 
Board  members,  at  the  time  they  saw  nothing  improper  in  a  White 
House  request  to  redraft  the  estimate  to  inchide  more  evidence.  How- 
ever, in  this  case,  they  interj^reted  tlie  White  House  request  as  a  subtle 
and  indirect  effort  to  alter  the  DCI's  national  intelligence  judgment.^^ 
On  the  second  issue,  three  months  later,  Helms  decided  to  delete  a 
paragraph  in  the  Board  of  National  Estimates'  draft  on  Soviet  stra- 
tegic forces  after  an  assistant  to  Secretary  of  Defense  Laird  informed 
Helms  that  the  statement  contradicted  the  public  position  of  the 
Secretary.^^ 
The  deleted  paragraph  read : 

We  believe  that  the  Soviets  recognize  the  enormous  diffi- 
culties of  any  attempt  to  achieve  strategic  superiority  of  such 
order  as  to  significantly  alter  the  strategic  balance.  Conse- 
quently, we  consider  it  highly  unlikely  that  they  %vill  attempt 
within  the  period  of  this  estimate  to  achieve  a  first-strike 
capability,  i.e.,  a  capability  to  launch  a  surprise  attack  against 
the  U.S.  with  assurance  that  the  USSR  would  not  itself  receive 
damage  it  would  regard  as  unacceptable.  For  one  thing,  the 
Soviets  w^ould  almost  certainly  conclude  that  the  cost  of 
such  an  undertaking  along  with  all  their  other  military  com- 
mitments would  be  prohibitive.  More  important,  they  almost 
certainly  would  consider  it  impossible  to  develop  and  deploy 
the  combination  of  offensive  and  defensive  forces  necessary 
to  counter  successfully  tlie  various  elements  of  U.S.  strategic 
attack  forces.  Finally,  even  if  such  a  project  were  economically 
and  technically  feasible  the  Soviets  almost  certainly  would 
calculate  that  the  U.S.  would  detect  and  match  or  overmatch 
their  efforts.-^ 

Subsequently,  the  State  Department  representative  on  the  United 
States  Intelligence  Board  inserted  the  deleted  paragraph  as  a  footnote. 

^  In  a  memorandum  to  the  US  IB  representatives,  dated  6/16/69,  the  Director 
of  the  Office  of  National  Estimates,  Abbot  Smith,  sitated  : 

"The  Memorandum  to  Holders  of  NIE  11-8-68,  approved  by  USIB  on  12  .Tune 
was  discussed  at  a  meeting  with  Dr.  Kissinger  and  others  on  Saturday.  Out  of 
this  meeting  came  requests  for  (a)  some  reordering  of  the  paper;  (b)  clarifica- 
tion of  some  points;  and  (c)  additional  argument  pro  and  con  about  the 
MRV-MIRV  problem.  We  have  accordingly  redrafted  the  paper  with  these  re- 
quests in  mind.  No  changes  in  estimates  were  asked,  nor  (we  think)  have  been 
made.  But  the  details  call  for  coordination." 

See  also,  staff  summary  of  Carl  Duckett  interview,  6/13/75. 

-=  Staff  summaries  of  interviews  with  John  Huizenga,  7/9/75 ;  Abbot  Smith, 
8/2/75  ;  Williard  Mathias,  7/7/75. 

^  Memorandum  from  Director  Helms  to  USIB  Members,  9/4/69,  and  staff  sum- 
mary of  Abbot  Smith  interview,  8/2/75. 

According  to  William  Baroody,  Secretary  Laird's  Special  Assistant : 

"I  am  fairly  confident  that  I  did  not  specifically  bring  pressures  to  bear  on 
the  Director  of  Centrnl  Intelligence  to  delete  or  change  any  particular  paragraph. 
We  did  discuss  the  differences  at  the  time  between,  as  these  documents  refresh 
my  memory,  between  the  DTA  concern  of  that  narticular  paragraph  and  the  CIA 
estimate."  (William  Baroody  testimony,  2/27/76,  p.  4.) 

"^  Draft  NIE  11-8-69.  approved  by  the  Board  of  National  Estimates  prior  to 
the  USIB  meeting  on  August  28, 1969. 


79 

These  are  stark,  and  perhaps  exceptional,  examples  of  White  House 
and  Defense  Department  pressures  on  the  DCI,  but  they  illustrate  the 
kinds  of  buffeting  with  wliich  the  DCI  must  contend.  Director  Helms 
testified : 

A  national  intelligence  estimate,  at  least  when  I  was  Di- 
rector, was  considered  to  be  the  Director's  piece  of  paper. 
USIB  contributed  to  tlie  process  but  anybody  could  contribute 
to  tlie  process,  the  estimates  staff',  individuals  in  the  White 
House.  And  the  fact  that  a  paragraph  or  a  sentence  was 
changed  or  amended  after  USIB  consideration  was  not 
extraordinary.  .  .  . 

So  this  question  w^hich  seems  to  have  come  up  about  some- 
body influencing  one  aspect  or  influencing  another  aspect  of 
it,  the  w^liole  process  was  one  of  influences  back  and  forth, 
some  in  favor  of  this  and  some  in  favor  of  that.  .  .  . 

So  that  was  the  system  then.  I  dont  know^  what  is  the  sys- 
tem now,  but  on  this  issue  of  the  first  strike  capability  one 
of  the  things  that  occurred  in  connection  with  that  was  a 
battle  royale  over  whether  it  was  the  Agency's  job  to  decide 
definitively  whether  the  Soviet  Union  had  its  first  strike 
capability  or  did  not  have  a  first  strike  capability.  And  this 
became  so  contentious  that  it  seemed  almost  impossible  to 
get  it  resolved. 

I  have  forgotten  just  exactly  what  I  decided  to  do  about 
the  whole  thing,  but  I  don't  know,  I  think  it  was  back  in  '69. 
There  was  a  question  about  certain  footprints  and  MRVs  and 
things  of  this  kind,  and  some  people  felt  that  they  were  very 
important  footprints  and  other  people  thought  they  were 
unimportant  footprints,  and  there's  no  question  there's  a 
battle  royale  about  it. 

However,  it  was  resolved  however.  If  you  felt  that  there 
was  pressure  to  eliminate  one  thing,  there  was  a  manifold 
pressure  to  put  in  something  else. 

But  anyway,  I  don't  really  see  an  issue  here.-® 
Wliile  Helms  may  not  see  an  issue  here,  the  Committee  found  that 
constant  tension  exists  between  the  DCI,  whose  responsibility  it  is  to 
produce  independent  and  objective  national  intelligence,  and  the  agen- 
cies, who  are  required  to  cooperate  in  this  effort. 

A  second  case  investigated  by  the  Select  Committee  illustrates  the 
potential  problems  the  DCI  confronts  in  producing  relevant  national 
intelligence  for  senior  policymakers  planning  highly  sensitive  mili- 
tary operations.  In  April  1970,  following  Prince  Sihanouk's  ouster, 
United  States  policymakers  decided  to  initiate  a  military  incursion 
into  Cambodia  to  destroy  North  Vietnamese  sanctuaries.  In  making 
this  decision,  these  policymakers  had  to  rely  on  an  earlier  (February) 
NIE  and  current  reporting  from  the  various  dej)artments  and  agen- 
cies. They  never  received  a  formal  DCI  national  intelligence  estimate 
or  memorandum  on  the  political  conditions  inside  Cambodia  after 
Sihanouk's  departure  or  on  the  possible  consequences  of  such  an 
American  incursion.  Why  ?  Because  Director  Helms  decided  in  April 
not  to  send  such  an  estimate  to  the  NSC. 


Richard  Helms  testimony,  1/30/76,  pp.  59-61. 


80 

In  April  1970,  analysts  in  the  Office  of  National  Estimates  pre- 
pared a  long  memorandum  entitled  "Stocktaking  in  Indochina :  Longer 
Term  Prospects"  which  included  discussion  of  the  broad  question  of 
future  developments  in  Cambodia,  and  addressed  briefly  the  question 
of  possible  United  States  intervention :  ^^ 

Nevertheless,  the  governments  of  Laos  and  Cambodia  are  both 
fragile,  and  the  collapse  of  either  under  Communist  pressure 
could  have  a  significant  adverse  psychological  and  military 
impact  on  the  situation  in  South  Vietnam.  .  .  .  Because  the 
events  in  Cambodia  and  their  impact  are  harder  to  predict, 
if  Hanoi  could  be  denied  the  use  of  base  areas  and  sanctuaries 
in  Cambodia,  its  strategy  and  objectives  in  South  Vietnam 
would  be  endangered.  Hanoi  is  clearly  concerned  over  such  a 
prospect.  Cambodia,  however,  has  no  chance  of  being  able  to 
accomplish  this  by  itself ;  to  deny  base  areas  and  sanctuaries 
in  Cambodia  would  require  heavy  and  sustained  bombing 
and  large  numbers  of  foot  soldiers  which  could  only  be  sup- 
plied by  the  U.S.  and  South  Vietnam.  Such  an  expanded 
allied  effort  could  seriously  handicap  the  Communists  and 
raise  the  cost  to  them  of  prosecuting  the  war,  but,  however 
successful,  it  probably  would  not  prevent  them  from  continu- 
ing the  struggle  in  some  form.^° 

Helms  received  this  draft  memorandum  13  days  before  the  planned 
United  States  incursion  into  Cambodia.  Then  the  day  before  the  in- 
cursion began.  Helms  decided  not  to  send  the  memorandum  to  the 
White  House.  A  handwritten  note  from  Helms  to  the  Chairman  of 
the  Board  of  National  Estimates  stated :  "Let's  take  a  look  at  this  on 
June  1,  and  see  if  we  w^ould  keep  it  or  make  certain  revisions." 

The  Committee  has  been  unable  to  pinpoint  exactly  why  Director 
Helms  made  this  decision.^^  One  member  of  the  Board  of  National 
Estimates  recalled  that  Helms  would  have  judged  it  "most  counter- 
productive" to  send  such  a  negative  assessment  to  the  White  House.^- 
George  Carver,  Director  Helms'  Special  Assistant  for  Vietnamese  Af- 
fairs in  1970,  objected  to  this  conclusion  that  Helms  refrained  from 
sending  the  memorandum  forward  because  he  thought  the  message 


^  DCI  Helms  encouraged  the  analysts  to  prepare  such  a  memorandum  for  the 
White  House.  On  an  early  draft,  Helms  commented  to  Abbot  Smith,  Chairman 
of  the  Board  of  National  Estimates :  "O.K.  Let's  develop  the  paper  as  you  sug- 
gest and  do  our  best  to  coordinate  it  within  the  Agency.  But  in  the  end  I  want 
a  good  paper  on  this  subject,  even  if  I  have  to  make  the  controversial  judgments 
myself.  We  owe  it  to  the  policymakers  I  feel."  (Richard  Helms,  4/7/70.) 

™  "Stocktaking  in  Indochina :  Longer  Term  Prospects,"  ONE  memorandum, 
4/17/70,  para.  69. 

^  Helms  told  the  Committee : 

"Unfortunately  my  memory  has  become  hazy  about  the  reasons  for  decisions 
on  the  papers  you  identify.  ...  In  a  more  general  way  let  me  try  to  be  help- 
ful to  you  (I  will  assume  that  you  have  or  will  talk  to  [George]  Carver  and  that 
you  win  give  rensonable  weight  to  hi«  comments.  In  the  first  p^ace,  it  is  almost 
impossible  at  this  late  date  to  recreate  all  the  relevant  circumstances  and  con- 
siderations which  went  into  decisions  of  the  kind  you  are  examining,  made  six 
years  ago.  Secondly,  it  is  dangerous  to  examine  exhaustively  one  bead  to  the 
exc^U'sinn  of  ^ther  be^ds  'n  the  necklace."  (Telegram  from  Richard  Helms  to  the 
Select  Committee,  3/2.3/76.) 

^Staff  summary  of  James  Graham  interview,  2/5/76. 


81 

would  be  unpalatable  or  distressing  to  the  White  House.^^  Rather, 
Carver  argued  tliat  Helms  judged  that  it  would  not  be  appropriate 
to  send  forward  a  memorandum  drafted  by  analysts  who  did  not  know 
about  the  planned  U.S.  military  operation. 

According  to  Carver's  testimony,  Helms  was  told  in  advance  about 
the,  planned  incursion  under  the  strict  condition  that  he  could  not 
inform  other  intelligence  analysts,  including  the  Chairman  of  the 
Board  of  National  Estimates  and  the  CIA  intelligence  analysts  work- 
ing on  Indochina  questions.  Then  because  the  analysts  were  not  in- 
formed, Helms  decided  not  to  send  forward  their  memorandum  on 
Indochina. 

According  to  Carver : 

He  [Hehns]  thought  that  it  might  be  unhelpful,  it  might 
indeed  look  a  little  fatuous,  because  the  people  who  had  pre- 
pared it  and  drafted  it  were  not  aware  that  the  U.S.  was  on 
the  verge  of  making  a  major  move  into  Cambodia,  hence  their 
commentary  was  based  on  the  kind  of  unspoken  assumption 
that  there  was  going  to  be  no  basic  operational  change  in  the 
situation,  as  they  projected  over  the  weeks  and  months  im- 
mediately ahead.^^ 

Further,  Carver  speculated  that  Helms  probably  felt  he  would  not 
be  listened  to  if  it  were  immediately  open  to  the  counterattack  that  the 
analysts  did  not  know  of  the  planned  operations.^*""  In  effect,  Carver 
argues  that  in  carrying  out  the  President's  restriction  on  discussing 
the  planned  operations.  Helms  denied  his  analysts  the  very  informa- 
tion he  considered  necessary  for  them  to  have  to  provide  intelligence 
judgments  for  senior  policymakers.  Helms  took  this  decision  even 
though  the  memorandum  in  question  included  a  judgment  on  the  pos- 
sible consequences  of  United  States  intervention  in  Cambodia. 

Thus,  for  whatever  combination  of  reasons,  in  the  spring  of  19Y0 
prior  to  tlie  Cambodia  incursion,  the  DCI  did  not  provide  senior 
policymakers  formally  with  a  national  intelligence  memorandum 
which  argued  that  the  operation  would  not  succeed  in  thwarting  the 
North  Vietnamese  effort  to  achieve  control  in  Indochina, 

Six  weeks  later,  while  the  Cambodia  incursion  was  still  underway, 
the  State  Department  requested  a  Special  NIE(SNIE)  on  North 
Vietnamese  intentions  which  would  include  a  section  on  the  impact  of 
the  United  States  intervention  in  Cambodia.  A  draft  estimate  was 
prepared  and  coordinated  within  the  intelligence  community,  just  as 
the  incursion  was  ending.  The  estimate  began  with  a  number  of  caveats 
such  as :  "Considerable  difficulties  exist  in  undertaking  this  analysis  at 
this  time.  Operations  in  Cambodia  are  continuing  and  the  data  on  re- 
sults to  date  is,  in  the  nature  of  things,  incomplete  and  provisional." 
The  draft  went  on  to  say  that  assessing  Hanoi's  intentions  is  always  a 
difficult  exercise  but  "even  more  complicated  in  a  rapidly  moving  situ- 


^'  George  Carver  testimony,  3/5/76,  p.  30. 

"  Ihid..  p.  10.  Carver  told  the  Committee  that  his  overall  judgments  were  "based 
on  what  I  am  reasonably  convinced  is  a  recollection  of  a  series  of  conversations, 
although  I  cannot  cite  to  you  a  specific  conversation  or  give  you  a  Memorandum 
for  the  Record  that  says  that."  (Ibid.,  p.  15.) 

"*  Ibid.,  pp.  22-23. 


82 

at  ion,  in  which  there  are  a  number  of  unknown  elements,  particularly 
with  respect  to  U.S.  and  Allied  courses  of  action."  With  respect  to  the 
situation  in  Cambodia,  the  estimate  concluded : 

Although  careful  analysis  of  these  losses  sujjsests  that  the 
Communist  situation  is  by  no  means  critical,  it  is  necessary  to 
retain  a  ^ood  deal  of  caution  in  judging  the  lasting  impact 
of  the  Cambodian  aifair  on  the  Communist  position  in  Indo- 
china.^^ 

Despite  all  these  qualifications,  Helms  again  decided  not  to  send  the 
estimate  to  the  White  House.  While  Helms  does  not  recall  the  reasons 
for  his  decision,  he  did  tell  the  Committee : 

In  my  opinion  there  is  no  way  to  insulate  the  DCI  from  un- 
popularity at  the  hands  of  Presidents  or  policymakers  if  he 
is  making  assessments  which  run  counter  to  administrative 
policy.  That  is  a  built-in  hazard  of  the  job.  Sensible  Presi- 
dents understand  this.  On  the  other  hand  they  are  human 
too,  and  in  my  experience  they  are  not  about  to  place  their 
fate  in  the  hands  of  any  single  individual  or  group  of  indi- 
viduals. In  sum,  make  the  intelligence  estimates,  be  sure  they 
reach  the  President  personally,  and  use  keen  judgment  as  to 
the  quantity  of  intelligence  paper  to  which  he  should  be  sub- 
jected. One  does  not  want  to  lose  one's  audience,  and  this  is 
easy  to  do  if  one  overloads  the  circuit.  No  power  has  yet  been 
found  to  force  Presidents  of  the  United  States  to  pay  atten- 
tion on  a  continuing  basis  to  people  and  papers  when  confi- 
dence has  been  lost  in  the  originator.^® 

Nevertheless,  as  John  Huizenga  testified: 

In  times  of  political  stress  on  intelligence,  there  is  more  a 
question  of  invisible  pressures  that  might  cause  people  to  feel 
that  they  were  being  leaned  upon,  even  though  nobody  asked 
them  to  take  out  some  words  or  add  some  words  .  .  .  When 
intelligence  producers  have  a  general  feeling  that  they  are 
working  in  a  hostile  climate,  what  really  happens  is  not  so 
much  that  they  tailor  the  product  to  please,  although  that's 
not  been  unknown,  but  more  likely,  they  avoid  the  treatment 
of  difficult  issues.^^ 

In  the  end,  the  DCI  must  depend  on  his  position  as  the  President's 
principal  intelligence  adviser  or  on  liis  personal  relationship  with  the 
President  to  produce  objective  and  independent  national  intelligence.^^ 
Organizational  arrangements  such  as  the  Board  of  National  Esti- 
mates may,  nevertheless,  help  insulate  the  DCI  from  pressures;  but 

^  Draft  SNIE  14-3-70. 

'^  Telegram  from  Richard  Helms  to  the  Select  Committee,  3/23/76. 

="  Huizenga,  1/26/76,  pp.  20-21. 

^  John  Huizenga  testified  that  "there  were  very  few  instances  of  gross  inter- 
ference." While  "it's  fair  to  say  [the  Cambodia  and  SS-9  cases]  were  gross,  par- 
ticularly the  SS-9  case,"  objectivity  and  independence  are  difficult  to  uphold 
when  political  consensus  breaks  down  over  foreign  policy  issues.  Huizenga 
concluded,  "the  experience  of  these  years  persuade  me  that  we  have  yet  to  prove 
that  we  can  have  in  times  of  deep  political  division  over  foreign  policy  a  profes- 
sional, independent,  objective  intelligence  system."  (Huizenga,  1/26/76,  p.  9.) 


83 

only  if  tliey  are  used.  In  the  cases  of  the  SS-9  and  Cambodia,  Helms 
took  the  decisions  without  consulting  with  the  Board  collectively. 

B.  Coordinator  of  Intelligence  Activities 
1.  The  Intelligence  Process 

In  theory,  the  intelliafence  process  works  as  follows.  The  President 
and  members  of  the  NSC — as  the  major  consumers  of  forei^  intel- 
ligence— define  what  kinds  of  information  they  need.  The  Director 
of  Central  Intelligence  with  the  advice  of  other  members  of  the  intel- 
ligence community  establishes  requirements  for  the  collection  of  dif- 
ferent kinds  of  intelligence.  (An  intelligence  requirement  is  defined 
as  a  consumer  statement  of  information  need  for  which  the  informa- 
tion is  not  already  at  hand.)  Resources  are  allocated  both  to  develop 
new  collection  systems  and  to  operate  existing  systems  to  fulfill  the 
intelligence  requirements.  The  collection  agencies — the  National  Se- 
curity Agency  (NSA),  CIA,  DIA,  and  the  military  services — manage 
the  actual  collection  of  intelligence.  Raw  intelligence  is  then  assembled 
by  analysts  in  CIA,  DIA,  the  State  Department,  and  the  military 
services  and  ^produced  as  finished  intelligence  for  senior  policymakers. 

In  practice,  however,  the  process  is  much  more  complicated.  The 
following  discussion  treats  the  Committee's  findings  regarding  the 
means  and  methods  the  DCI  has  used  to  carry  out  his  responsibility 
for  coordinating  intelligence  community  activities. 

'2.  Managing  Intelligence  Collection 

Although  the  responsibility  of  the  DCI  to  coordinate  the  activities 
of  the  intelligence  community  is  most  general,  the  DCIs  have  tended 
to  interpret  their  responsibility  narrowly  to  avoid  antagonizing  the 
other  departments  and  agencies  in  the  intelligence  community.  While 
DCIs  have  sought  to  define  the  general  intelligence  needs  of  senior 
United  States  policymakers,  they  have  not  actually  established  intel- 
ligence collection  requirements  or  chosen  specific  geographical  targets. 

The  individual  departments  establish  their  own  intelligence  collec- 
tion requirements  to  fulfill  their  perceived  national  and  departmental 
needs.  For  example,  DIA  compiles  the  Defense  Intelligence  Objectives 
and  Priorities  document  (DIOP)  which  is  a  single  statement  of  intel- 
ligence requirements  for  use  by  all  DOD  intelligence  components,  in 
particular.  Defense  attaches,  DIA  production  elements,  the  intelli- 
gence groups  of  the  military  services,  and  the  military  commands.  The 
DIOP  contains  a  listing  by  country  of  nearly  200  intelligence  issues 
and  assigns  a  numerical  priority  from  one  to  eight  to  each  country  and 
topic.  The  State  Department  sends  out  ad  hoc  requests  for  informa- 
tion from  United  States  missions  abroad.  Although  the  Department 
does  not  compile  a  formal  requirements  document,  Foreign  Service 
Officer  reporting  responds  to  the  information  needs  of  the  Secretary 
of  State. 

In  the  absence  of  authority  to  establish  intelligence  requirements, 
the  DCI  relies  on  issuing  general  collection  guidance  to  carry  out  his 
coordinating  responsibilities.  The  DCI  annually  defines  United  States 
substantive  intelligence  priorities  for  the  coming  year  in  a  DCI  Direc- 
tive. This  sets  out  an  elaborate  matrix  arraying  each  of  120  countries 
against  83  intelligence  topics  and  assigning  a  numerical  priority  from 


84 

1  to  7  for  each  country  and  topic  combination.  Since  1973,  the  DCI 
has  also  distributed  a  memorandum  called  the  DCI's  "Perspectives" 
\Yhich  defines  the  major  intellio^ence  problems  policymakers  will  face 
over  the  next  five  years;  a  memorandum  known  as  the  DCI's  "Objec- 
tives" which  details  the  general  resource  management  and  substantive 
intelligence  problems  the  community  will  face  in  the  upcoming  year; 
and  the  DCI's  "Key  Intelligence  Questions"  (KIQs)  which  identify 
topics  of  particular  importance  to  national  policymakere. 

All  these  documents  have  in  the  past  been  reviewed  by  members  of 
the  intelligence  community  on  USIB,  but  the  DCI  cannot  compel  the 
departments  and  agencies  to  respond  to  this  guidance.  For  example, 
the  Defense  Intelligence  Objectives  and  Priorities  "express  the 
spectrum  of  Defense  intelligence  objectives  and  priorities  geared 
specifically  to  approved  strategy"  derived  from  the  Joint  Chiefs  of 
Staff.  But  the  DIOP  does  not  include  a  large  number  of  economic, 
political  and  sociological  questions  which  the  Defense  Department 
considers  inappropriate  for  it  to  cover.  Consequently,  Defense-con- 
trolled intelligence  assets  do  not  give  priority  to  non-military  ques- 
tions even  though  such  questions  are  established  as  priorities  in  the 
DCI's  guidance. 

In  addition,  through  three  intelligence  collection  committees  of  the 
United  States  Intelligence  Board,  DCIs  have  tried  in  the  past  to  rec- 
oncile the  different  departmental  requirements  and  to  insure  that  the 
interests  of  the  entire  community  are  brought  to  bear  in  the  intelligence 
collectors'  operations.^^  The  Committee  on  Imagery  Requirements  and 
Exploitation  (COMIREX)  dealt  with  photographic  reconnaissance.*" 
The  SIGINT  Committee  coordinated  the  collection  of  signals  and 
communications  intelligence.*^  The  Human  Resources  Committee  dealt 
with  overt  and  clandestine  human  collection.*^ 

In  the  collection  of  overhead  photography  and  signals  intelligence, 
the  DCI  through  the  COMIREX  and  SIGINT  Committees  provides 
guidance  as  to  targets  and  amounts  of  coverage.  These  Committees  also 
administer  a  complex  accounting  system  designed  to  evaluate  how 
well,  in  technical  terms,  the  specific  missions  have  fulfilled  the  various 
national  and  departmental  requirements.  Because  of  the  nature  of  over- 
head collection,  the  whole  community  can  participate  in  selecting  the 
targets  and  in  evaluating  its  success.  The  operating  agency  is  respon- 
sive solely  to  requirements  and  priorities  established  by  the  USIB 
committees.  At  the  same  time,  the  DCI  alone  cannot  direct  which 
photographs  to  take  or  when  to  alter  the  scope  of  coverage.  The  role 
of  the  DCI  is  to  make  sure  that  the  preferences  of  the  entire  commu- 
nity are  taken  into  account  when  targets  are  chosen. 


'*  Under  President  Ford's  Executive  Order  No.  11905,  these  three  collection 
committees  will  probably  continue  under  the  DCI's  responsibility  to  establish 
"such  committees  of  collectors,  producers,  and  users  to  assist  in  his  conduct  of 
his  responsibilities." 

^  In  1955,  Richard  Bissell.  a  Special  Assistant  to  the  DCI,  set  up  an  informal 
Ad-Hoc  Requirements  Committee  (ARC)  to  coordinate  collection  requirements 
for  the  U-2  reconnaissance  program.  Membership  initially  included  representa- 
tives of  CIA,  the  Army,  Navy,  and  Air  Force.  Later  representatives  of  NSA,  the 
Joint  Chiefs  of  Staff,  and  the  State  Department  were  added.  In  1960.  with  the 
development  of  a  new  overhead  reconnaissance  system,  the  ARC  was  supplanted 
by  a  formal  USIB  Committee,  the  Committee  on  Overhead  Reconnaissance  or 


85 

For  example,  prior  to  the  Middle  East  war  in  1973,  the  USIB 
SIGINT  committee  recommended  that  the  Middle  East  be  a  priority 
taro:et  for  intelligence  collection  if  hostilities  broke  out,  and  asked 
NSA  to  evaluate  the  intelligence  collected  and  to  determine  appro- 
priate targets.  When  the  war  broke  out,  NSA  implemented  this  USIB 
guidance.  Later  in  the  week,  the  same  committee  discussed  and  ap- 
proved DIA's  recommendation  to  change  the  primary  target  of  one 
collector.  The  DCI  did  not  order  the  changes  or  direct  what  intelli- 
gence to  collect,  but  through  the  USIB  mechanism  he  insured  that 
the  community  agreed  to  the  retargeting  of  the  system. 

The  DCI  has  been  less  successful  in  involving  the  entire  intelligence 
community  in  establishing  collection  guidance  for  NSA  operations  or 
for  the  clandestine  operations  of  CIA's  Directorate  of  Operations. 
These  collection  managers  have  substantial  latitude  in  choosing  which 
activities  to  pursue ;  and  the  DCI  has  not  yet  established  a  mechanism 
to  monitor  how  well  these  collectors  are  fulfilling  the  DCI's  com- 
munity guidance. 

During  1975,  USIB  approved  a  new  National  SIGINT  Kequire- 
ments  System,  an  essential  feature  of  which  requires  USIB  to  initiate  a 
formal  community  review  and  approval  of  all  SIGINT  requirements. 
In  addition,  each  requirement  must  contain  a  cross  reference  to  per- 
tinent DCI  priorities  and  specific  KIQs.  However,  this  system  does 

COMOR.  COMOR's  responsibilities  included  coordination  of  collection  require- 
ments for  the  development  and  operation  of  all  overhead  reconnaissance  systems. 
As  these  programs  grew  and  the  volume  of  photographs  increased,  serious  prob- 
lems of  duplication  in  imagery  exploitation  prompted  the  DCI  and  the  Secretary 
of  Defense  to  establish  a  special  joint  review  group.  Subsequently,  it  recom- 
mended the  establishment  of  the  National  Photographic  Interpretation  Center 
(NPIC)  and  the  creation  of  a  new  USIB  Committee  to  coordinate  both  collection 
and  exploitation  of  national  photographic  intelligence.  In  1967,  COMIREX  was 
established. 

*'  During  World  War  II,  the  military  services  controlled  all  communications 
intelligence.  After  the  war,  a  U.S.  Communications  Intelligence  Board  (USCIB) 
was  established  to  coordinate  COMINT  activities  for  the  NSC  and  to  advise  the 
DCI  on  COMINT  issues.  However,  in  1949  the  Secretary  of  Defense  set  up  a 
separate  COMINT  board  under  the  Joint  Chiefs  of  Staff  to  oversee  the  military's 
COMINT  activities,  and  this  arrangement  stood  for  three  years,  despite  the 
DCI's  objections.  In  1952,  NSA  was  established  with  operational  control  over 
COMINT  resources  and  the  Secretary  of  Defense  was  given  executive  authority 
over  all  COMINT  activities.  At  the  same  time,  the  USCIB  was  reconstituted 
under  the  chairmanship  of  the  DCI  to  advise  the  Director  of  NSA  and  the 
Secretary  of  Defense.  In  1958,  the  USCIB  was  merged  with  the  Intelligence 
Advisory  Committee  to  form  the  United  States  Intelligence  Board.  The  COMINT 
Committee  of  the  USIB  was  formed  soon  thereafter ;  this  became  the  SIGINT 
Committee  in  1962  when  its  responsibilities  were  extended  to  include  ELINT. 

"General  Bennett,  Director  of  the  Defense  Intelligence  Agency,  proposed  in 
1970  the  establishment  of  a  USIB  subcommittee  to  provide  a  national-level  forum 
to  coordinate  the  various  human  source  collection  programs,  both  overt  and 
clandestine.  Following  objections  from  the  CIA's  Directorate  of  Operations, 
Director  Helms  decided  instead  to  establish  an  ad  hoc  task  force  to  study  the 
whole  range  of  HUMINT  problems.  After  a  year's  study,  the  task  force  recom- 
mended the  establishment  of  a  USIB  committee  on  a  one-year  trial  basis.  The 
President's  Fnre'gn  Int^eilisence  Advi'-ory  Board  (PFIAB),  in  a  separate  study, 
also  endorsed  the  idea.  Subsequently,  the  Human  Sources  Committee  was  accord- 
ed permanent  status  in  June  1974  and  in  1975  its  name  was  changed  to  the 
Human  Resources  Committee. 


86 

not  vest  in  the  DCI  operational  authority  over  NSA  and  its  collection 
systems.*^  The  Director  of  NSA  will  still  determine  which  specific 
communications  to  monitor  and  which  signals  to  intercept.  In  a  crisis, 
the  Secretaries  of  State  and  Defense  and  tlie  military  commanders  will 
continue  to  be  able  to  task  NSA  directly  and  inform  the  DCI  and 
the  SIGINT  Committee  afterwards. 

In  contrast  to  technical  intelligence  collection  where  the  DCI  has 
sought  expanded  community  involvement  in  defining  requirements, 
DCIs  have  not  been  very  receptive  to  Defense  Department  interests  in 
reviewing  CIA's  clandestine  intelligence  collection.  In  part,  the  DCIs 
have  recognized  the  difficulty  of  viewing  human  collection  as  a  whole, 
since  it  comprises  many  disparate  kinds  of  collectors,  some  of  which 
are  not  even  part  of  the  intelligence  comnninity.  For  example,  Foreign 
Service  Officers  do  not  view  themselves  as  intelligence  collectors, 
despite  the  large  and  valuable  contribution  FSO  reporting  makes  to  the 
overall  national  human  intelligence  effort.  In  addition,  the  CIA's 
Clandestine  Service  (DDO)  has  lobbied  against  a  USIB  Human 
Sources  Committee,  fearing  that  it  would  compromise  the  secrecy  of 
their  very  sensitive  operations.^* 

So  DCIs,  as  Directors  of  the  agency  responsible  for  collecting 
intelligence  clandestinely,  resisted  establishment  of  a  permanent 
ITSIB  committee  to  review  human  collection  until  1974.*^  Wlien 
established,  the  Committee  was  specifically  not  given  responsibility 
for  reviewing  the  operational  details  or  internal  management  of  the 
individual  departments  or  agencies.  In  the  case  of  "sensitive"  infor- 
mation, departments  and  agencies  were  authorized  to  withhold  infor- 
mation from  the  Committee  and  report  directly  to  the  DCI. 

It  is  not  surprising,  therefore,  that  the  Human  Resources  Com- 
mittee has  only  just  begun  to  expand  community  influence  over  human 
collection.  The  Committee  issues  a  general  guidance  document  called 
the  Current  Intelligence  Reporting  List  (CIRL).  Although  the  mili- 
tary makes  some  use  of  this  document,  the  DDO  instructs  CIA 
Stations  that  the  CIRL  is  provided  only  for  reference  and  does  not 
constitute  collection  requirements  for  CIA  operations.  The  Human 


*^  William  Colby  testified  before  the  Committee  : 

"I  think  it  is  clear  I  do  not  have  command  authority  over  the  [NSA].  That 
is  not  my  authority.  On  the  other  hand,  the  National  Security  Council  Intelli- 
gence Directives  do  say  that  I  do  have  the  job  of  telling  them  what  these  priori- 
ties are  and  what  the  subjects  they  should  be  working  on  are."  (William  Colby 
testimony,  9/29/75,  pp.  20-21.) 

**  The  DCI  currently  exercises  some  control  over  military  clandestine  opera- 
tions. The  Chief  of  Stntion  in  e^ch  country  is  the  DCI's  "designated  representa- 
tive" and  has  responsibility  for  coordinating  all  military  clandestine  opera- 
tions. In  the  past,  the  DDO  has  only  objected  if  the  projects  were  not  worth  the 
risk  or  duplicated  a  DDO  operation.  The  Chief  of  Station  rarely  undertook  to 
evaluate  whether  the  military  operations  could  be  done  openly  or  would  be 

Sliccossful. 

^  While  the  DCI  has  final  responsibility  for  the  clandestine  collection  of 
intelligence,  he  i^till  faces  problems  in  coordinating  the  clandestine  and  technical 
collection  programs  in  his  own  agency.  Illustrative  of  this  is  the  recent  estab- 
lishment of  a  National  Intelligence  OflScer  (NIO)  for  Snecial  Activities  to  help 
the  DCI  focus  DDO  operations  on  three  or  four  central  intellisence  gaps.  Direc- 
tor Colby  determined  that  only  through  a  special  assistant  could  he  break  down 
the  separate  cultures  of  DDO  and  technical  intelligence  collection  and  the  barriers 
between  the  intelligence  analysts  and  DDO. 


87 

Resources  Committee  has  initiated  community-wide  assessments  of 
human  source  reporting  in  individual  countries  which  emphasize  the 
ambassador's  key  role  in  coordinating  human  collection  activities  in 
the  field.  But  the  Committee  has  not  defined  a  national  system  for 
establishing  formal  collection  requirements  for  the  various  human 
intelligence  agencies. 

In  summar}^,  the  DCI  does  not  have  authority  to  manage  any  collec- 
tion programs  outside  his  own  agency.  The  DCI  only  issues  general 
guidance.  The  departments  establish  their  own  intelligence  collection 
requirements  and  the  collection  managers  (NSA,  DIA,  CIA,  and 
the  military  services)  retain  responsibility  for  determining  precisely 
which  intelligence  targets  should  be  covered.  President  Ford's  Execu- 
tive Order  does  not  change  the  DCI  role  in  the  management  of 
intelligence  collection  activities. 

3.  Allocating  Intelligence  Resources 

In  a  1971  directive.  President  Nixon  asked  Director  Helms  to  plan 
and  review  all  intelligence  activities  including  tactical  intelligence 
and  the  allocation  of  all  resources  to  rationalize  intelligence  priorities 
within  budgetary  constraints.^^  Since  1971,  the  DCI  has  prepared 
recommendations  to  the  President  for  a  consolidated  national  intelli- 
gence program  budget.  Director  Helms,  in  his  first  budget  recommen- 
dations, proposed  a  lid  on  intelligence  spending,  noting  that  "we 
should  rely  on  cross-program  adjustments  to  assure  that  national 
interests  are  adequately  funded."  *^  However,  prior  to  President 
Ford's  Executive  Order,  the  DCI  has  had  no  way  to  insure  author- 
itatively that  such  objectives  were  realized. 

The  DCI  has  independent  budget  authority  over  only  his  own 
agency  whi'^h  represents  only  a  small  percentage  of  the  overall 
national  intelligence  budget.  As  chairman  of  an  Executive  Committee 
or  ExCom  for  special  reconnaissance  activities,  the  DCI  has  been 
involved  in  the  preparation  of  the  program  budget  for  the  develop- 
ment and  management  of  the  major  United  States  technical  collection 
systems.  However,  differences  of  opinion  between  the  DCI  and  the 
other  member  of  the  ExCom.  the  Assistant  Secretary  of  Defense 
for  Intelligence,  were  referred  to  ih^  Secretary  of  Defense  for  resolu- 
tion. The  Secretary  of  Defense  in  his  budget  allocated  the  remaining 
intelligence  community  resources. 

The  DCI's  role  in  the  Defense  intelligence  budget  process  was  in 
effect  that  of  an  adviser.  The  DCI's  "Perspectives,"  which  analyze 
the  political,  economic,  and  military  environment  over  the  next  five 
years,  have  had  little  impact  on  the  formulation  of  Defense  intelli- 
gence resource  requirements.  According  to  John  Clarke,  former  Asso- 


^  "Announcement  Ontlinins  Management  Sfeps  for  Improvinc  the  Effectiveness 
of  the  Intelligence  Community,"  November  5,  1971,  7  Pres.  Docs.  p.  14S2.  Nixon 
sought  to  enhance  the  ro'e  of  the  DCI  as  community  leader  and  to  give  the  DCI 
responsibility  to  coordinate  Defense  Department  technical  collection  operations 
with  other  intellisrence  programs.  Nixon's  directive  followed  a  comprehensive 
study  of  the  intelligence  community  by  the  Office  of  Management  and  Budget 
(known  as  the  Schlesinger  Report)  which  recommended  a  fundamental  reform 
in  tho  intelligence  community's  decisionmaking  bodies  and  procedures. 

"  Director  of  Central  Intelligence,  National  Intelligence  Program  Memorandum, 
FY  1974,  p.  44. 


88 

ciate  Deputy  to  the  Director  of  Central  Intelligence  for  the  Intelli- 
gence Community,  the  "Perspectives"  ''did  not  have  any  great  bearing 
on  the  formal  guidances  that  the  different  departments  naving  intel- 
ligence elements  used  in  deciding  how  much  they  needed  or  how  many 
dollars  they  required  for  future  years."  *^  The  military  services  and 
DIA  responded  to  the  fiscal  guidance  issued  by  the  Secretary  of 
Defense. 

The  DCI's  small  staff  of  seven  professionals  in  the  Resource  Re- 
view Office  of  the  Intelligence  Community  Staff'  kept  a  low  profile 
and  spent  most  of  its  time  gathering  information  on  the  various 
Defense  intelligence  activities.  They  did  not  provide  an  independent 
assessment  of  the  various  programs  for  the  DCI.  Consequently,  the 
DCI  rarely  had  sufficient  knowledge  or  confidence  to  challenge  a 
Defense  Department  recommendation.  When  the  DCI  did  object,  he 
generally  focused  on  programs  where  he  thought  the  Defense  Depart- 
ment was  not  giving  adequate  priority  to  intelligence  activities  in 
which  the  President  had  a  particular  interest. 

For  example,  partly  as  a  result  of  the  intense  concern  by  the  NSC 
staff,  the  DCI  expended  substantial  effort  to  insure  that  two  Air 
Force  ships,  initially  built  to  operate  on  the  Atlantic  missile  range 
monitoring  Cape  Canaveral  hrings,  continued  to  be  available  to 
monitor  foreign  missile  activities.  When  in  1970-1971,  the  number  of 
United  States  missile  tests  decreased  substantially,  the  Air  Force 
proposed  that  both  ships  be  retired.  The  DCI,  in  turn,  requested  an 
intelligence  community  study  which  concluded  that  the  ships  were 
essential  for  foreign  intelligence  purposes.  Consequently,  the  DCI 
brokered  an  arrangement  for  a  sharing  of  the  ships'  cost  within  the 
Department  of  Defense.  Today,  a  little  under  20  percent  of  the  ship 
program  is  devoted  to  intelligence  needs.  The  DCI  had  neither  the 
authority  to  direct  the  retention  of  these  Air  Force  ships  nor  sufficient 
resources  to  take  over  their  funding  for  intelligence  purposes  to  insure 
that  they  were  not  retired.  Nevertheless,  the  DCI  played  a  definite 
role  in  working  out  an  arrangement  whereby  at  least  one  ship  will 
be  available  until  the  national  intelligence  requirement  can  be  met 
by  another  means.^® 

In  practice,  the  DCI  only  watched  over  the  shoulder  of  the  Assistant 
Secretary  of  Defense  for  Intelligence  as  he  reviewed  the  budget  re- 
quests of  DIA,  NSA,  and  the  military  services.  If  the  DCI  wished 
to  raise  a  particular  issue,  he  had  a  number  of  possible  forums.  He  could 
set  up  an  ad  hoc  interagency  study  group  or  discuss  the  question  in 
the  Intelligence  Resources  Advisory  Committee  (IRAC).^°  He  could 
highlight  resource  issues  in  the  annual  fall  joint  OMB-Defense 
Department  review^  of  the  Defense  budget  or  in  his  December  letter  to 
the  President  presenting  the  consolidated  national  intelligence  budget. 
However,  the  groups  were  only  advisory  to  the  DCI  and  had  no 
authority  over  the  Secretary  of  Defense.  The  joint  review^  and  the 

**John   Clarke  testimony,  2/5/76,  pp.  15-16. 

*' According  to  Carl  Duckett,  the  CIA's  Deputy  Director  of  Science  and 
Technology,  "frankly  we  had  to  fight  very  hard  the  last  two  years  to  keep  the 
ships  active  at  all."  (Carl  Duckett  testimony,  11/10/75,  pp.  106-107.) 

™  IRAC  was  established  in  1971  to  advise  the  DCI  in  preparing  a  consolidated 
intelligence  program  budget  for  the  President.  Members  included  representatives 
from  the  Departments  of  State  and  Defense,  0MB,  and  the  CIA.  IRAC  was 
abolished  by  President  Ford's  Executive  Order  of  2/18/76. 


89 

DCI's  letter  to  the  President  occurred  so  late  in  the  Defense  Depart- 
ment budget  cycle  that  the  DCI  had  little  opportunity  to  effect  any 
sionificant  changes. 

Thus,  the  DCI's  national  budget  recommendations  were  for  the 
most  part  the  aggregate  figures  proposed  by  the  vai-ious  Defense 
agencies.  The  DCI  did  not  proAade  an  independent  calculated  evalua- 
tion of  the  entire  national  intelligence  budget.  The  DCI  did  not 
present  the  President  with  broad  alternative  options  for  the  alloca- 
tion of  national  intelligence  resources.  The  DCI  was  not  able  to  effect 
trade-offs  among  the  different  intelligence  programs  or  to  reconcile 
differences  over  priorities.  Finally,  the  President's  decisions  on  the 
intelligence  budget  levels  were  not  based  upon  the  recommendations 
of  the  DCI.  but  rather  upon  Defense  Department  totals.  According  to 
John  Clarke: 

I  would  have  to  submit  that  in  my  judgment  I  do  not  think 
the  Presidents  have  used  the  Director's  recommendations 
with  respect  to  the  intelligence  budgets.  There  have  been  few 
exceptions  where  they  have  solidified  behind  the  Director's 
appeal,  but  fundamentally  he  has  looked  to  the  Secretary  of 
Defense  to  decide  what  level  of  intelligence  activities  there 
should  be  in  the  defense  budget.^^ 

Because  the  Secretary  of  Defense  had  final  authority  to  allocate 
most  of  the  intelligence  budget,  the  DCI  either  had  to  "persuade"  the 
Secretary  to  allocate  Defense  intelligence  resources  according  to  the 
Direx^tor's  recommendations  or  take  his  case  directly  to  the  President. 
According  to  James  Schlesinger : 

.  .  .  the  authority  of  whoever  occupies  this  post,  whatever 
it  is  called  comes  from  the  President.  .  .  .  To  the  extent  that 
it  is  believed  that  he  has  the  President's  ear,  he  will  find 
that  the  agencies  or  departments  will  be  responsive,  and  if  it 
is  believed  that  he  does  not  have  the  President's  ear.  they  will 
be  unresponsive.^- 

But  because  the  DCI  must  expend  substantial  political  capital  in 
taking  a  Defense  budget  issue  to  the  President,  he  rarely  has  sought 
Presidential  resolution.  Over  the  past  five  years,  the  DCI  went  directly 
to  the  President  only  twice.  Both  these  issues  involved  expensive 
technical  collection  systems,  and  both  times  the  DCI  prevailed. 

In  summary,  DCIs  have  not  been  able  to  define  priorities  for  the 
allocation  of  intelligence  resources — either  among  the  different  sys- 
tems of  intelligence  collection  or  among  intelligence  collection,  anal- 
ysis, and  finished  intelligence.  Without  authority  to  allocate  intelli- 
gence budget  resources,  DCIs  have  been  unable  to  insure  that  un- 
warranted duplication  and  waste  are  avoided. 

4.  Key  Intelligence  Questions 

As  described  above,  DCIs  have  confronted  major  problems  in  seek- 
ing to  cany  out  their  coordinating  responsibilities  under  the  1947 
National  Security  Act.  They  have  not  had  authority  to  establish  re- 
quirements for  tile  collection  or  production  of  national  intelligence. 


^Clarke,  2/5/76,  p.  27. 

=-'  Schlesinger,  2/2/76,  pp.  43,  45. 


69-983  O  -  76  -  7 


90 

They  have  not  been  able  to  institute  an  effective  means  to  evahiate 
liow  well  the  community  is  carryino-  out  their  guidance.  They  have 
not  had  a  mechanism  to  direct  the  allocation  of  intelligence  resources 
to  insure  that  the  intelligence  needs  of  national  policymakers  are  met. 

To  help  solve  these  problems,  Director  Colby  instituted  a  new  in- 
telligence management  system  known  as  the  Key  Intelligence 
Questions  (KIQs).  Through  formation  of  a  limited  number  of  KIQs, 
Colby  tried  to  focus  collection  and  production  efforts  on  critical  policy- 
maker needs  and  to  provide  a  basis  for  reallocating  resources  toward 
priority  issues.^^  This  section  will  briefly  highlight  the  resistance  which 
Colby's  new  management  scheme  provoked  and  the  difficulties  experi- 
enced in  evaluating  the  overall  community  efforts. 

The  KIQ  scheme  had  four  stages.  First  the  DCI  issued  the  KIQs. 
Then  the  National  Intelligence  Officers  (NIOs)  with  representatives 
from  the  various  collection  and  production  agencies  developed  a 
strategy  to  answer  the  individual  KIQs.  After  surveying  what  in- 
formation was  currently  available  to  answer  the  KIQs,  the  various 
agencies  made  commitments  to  collect  and  produce  intelligence 
reports  "against"  the  various  KIQs.  At  the  end  of  the  year,  the  DCI 
evaluated  the  intelligence  community's  perfoiTnance. 

The  KIQ  management  process  has  finished  its  first  full  year  of 
operation  and  a  beginning  has  been  made  to  provide  intelligence  con- 
sumers with  the  opportunity  to  make  known  their  priorities  for  intelli- 
gence collection  and  production.  Collection  managers  have  been 
brought  together  in  developing  a  strategy  to  answer  key  questions  and 
analysts  have  received  guidance  as  to  the  kinds  of  reports  they  should 
produce.  In  addition,  the  DCI  now  has  before  him  considerable  in- 
formation about  how  the  intelligence  community  is  focusing  on 
intelligence  questions  which  are  important  to  senior  national  policy- 
makers. He  should  be  in  a  better  position  to  show  collection  and 
production  managers  where  they  have  failed  to  meet  their  commit- 
ments to  work  against  individual  KIQs  or  to  spend  a  high  percentage 
of  their  resources  on  KlO-related  activities. 

However,  while  the  KIQ  concept  is  imaginative,  the  management 
tool  has  encountered  serious  problems.  First,  the  KIQ  system  does  not 
solve  the  DCI's  problem  of  trying  to  establish  priorities  in  intelli- 
gence collection  and  production.  Few  topics  are  not  included  under 
one  KIQ  or  another.  The  KIQs  have  not  yet  been  meshed  with  the 
existing  requirements  system.  While  the  KIQs  are  supposed  to  estab- 
lish collection  and  production  requirements  in  lieu  of  the  DCI's  Di- 
rective on  priorities,  both  continue  to  exist  today.  The  Defense  Depart- 
ment has  not  only  continued  to  issue  the  DIOiP  but  has  produced  its 
own  Defense  Key  Intelligence  Questions  (DKIQs)  which  number  over 
]  ,000.  Instead  of  providing  a  means  for  the  DCI  to  establish  priorities 
for  the  intelligence  community,  the  KIQs  to  date  have  added  another 
layer  of  requirements. 


^^  In  FY  1975,  there  were  69  KIQs.  drafted  by  the  DCI's  National  Intelligence 
Officers  in  consultation  with  the  NSC  Intelligence  Committee  working  group. 
Approximately  one-third  of  the  KIQs  dealt  with  Soviet  foreign  policy  motivations 
and  military  technology.  The  other  KIQs  dealt  with  such  issues  as  the  negoti- 
ating position  of  the  Arabs  and  Israelis,  the  terrorist  threat,  etc. 


91 

Second,  Colby's  management  scheme  has  met  strong  resistance 
from  the  collection  and  the  production  agencies.  After  one  year  it  is 
difficult  to  identify  many  intelligence  activities  that  have  changed 
because  of  tlie  IviQs.  llie  IviQ,  K^trategy  Keports  were  issued  nine 
months  after  tlie  IviQs  and  tended  to  list  collection  and  production  ac- 
tivities already  under  way.  The  DCl  was  not  in  a  position  to  direct 
the  various  members  of  tlie  intelligence  community  to  undertake  com- 
mitments tor  diuerent  colieccion  eirorts,  and  tiie  Strategy  Keports 
rarely  contained  new  commitments. 

While  all  agencies  participated,  DIA  and  DDO  have  responded  to 
the  KIQs  only  insofar  as  they  were  consistent  with  their  respective 
internal  collection  objectives.  DlA's  "IviQ  Collection  Performance 
Keport"  pointed  out  tliat  "the  Deiense  Attache  system  primarily  re- 
sponds to  the  DKIQs  and  J  SOP  X  Joint  Strategic  Objectives  Plan] 
objectives  and  therefore,  responses  to  KIQs  will  have  to  maintain  con- 
sistency with  the  two  aforementioned  collection  guidance  vehicles."  ^* 
111  fact,  DIA  writes  its  "Intelligence  Collection  Requests"  and  "Con- 
tinuing Intelligence  Kequirements,"  and  they  are  then  keyed  back  to 
the  relevant  KiQs,  somewhat  as  an  afterthought.^^ 

The  Deputy  JJirector  of  Operations  for  tlie  CIA  issues  his  "Ob- 
jectives" for  the  collection  of  clandestine  human  intelligence.  While 
these  are  derived  from  the  KIQs,  these  "Objectives"  are  in  fact  the 
collection  requirements  of  the  Clandestine  Service.  Since  it  takes  so 
long  to  recruit  agents,  DDO  considers  it  is  not  in  a  position  to  respond 
to  specific  KIQs  dealing  with  near-term  intelligence  gaps  unless  a 
source  is  already  in  place.  Moreover,  DDO  determined  not  to  deflect 
or  divert  its  effort  to  satisfy  KIQs  unless  the  questions  happened  to 
fall  within  DDO  internal  objectives. 

DIA  and  DDO  invoked  the  KIQs  to  justify  thei?'  operations  and 
budgets,  however  they  did  not  appear  to  be  shaping  the  programs  to 
meet  KIQ  objectives.  Without  authority  to  direct  resources  to  answer 
the  specific  Key  Intelligence  Questions,  the  DCI  had  little  success  in 
compelling  the  major  collectors  and  producers  of  intelligence  to  re- 
spond to  the  KIQs,  if  they  were  unwilling.  Only  NSA  has  made  a 
serious  effort  to  insure  that  their  collection  requirements  are  respon- 
sive to  the  KIQs.  In  USIB  meetings,  NSA  Director  General  Allen 
argued  that  the  KIQs  should  be  viewed  as  requirements  for  the  in- 
telligence community  and  the  KIQ  Strategy  Keports  should  provide 
more  detailed  instructions  to  field  elements  for  collection.^^ 

Colby's  new  management  scheme  also  failed  to  establish  a  workable 
evaluation  process.  NIOs  provided  subjective  judgments  as  to  how  well 
the  community  had  answered  each  KIQ  and  an  assessment  of  the  rela- 
tive contribution  of  each  agency.  Although  NIOs  discussed  their  assess- 
ments with  consumers,  they  had  no  staff  to  conduct  a  systematic  and 


^  DIA,  "KIQ  Collection  Performance  Report,"  8/18/75. 

°^  In  FY  1975,  only  7  percent  of  DIA's  attache  reports  responded  to 
KIQs.  Out  of  2,111  attache  reports  against  the  KIQs  only  34  of  the  69  were 
covered.  According  to  DIA,  military  attaches  have  access  to  particular  types  of 
information  and  it  would  be  unfair  to  assume  they  had  the  capability  to  respond 
to  all  the  KIQs. 

^Minutes  of  USIB  meeting,  2/6/75.  Approximately  70  percent  of  NSA's  re- 
quirements for  FY  1975  were  KIQ-related,  and  about  50  percent  of  its  operations 
and  maintenance  budget  could  be  ascribed  to  the  KIQs. 


92 

independent  review  of  how  well  the  community  had  answered  the 
questions.  Furthermore,  NIOs  did  not  base  their  evaluations  on  any 
specific  kinds  of  information,  such  as  all  production  reports  or  all  raw 
intelligence  collected  on  a  particular  KIQ.  They  commented  on  how 
well  the  agencies  had  carried  out  their  commitments  in  the  Strategy 
Reports  without  asking  the  collectors  for  any  information  about  what 
activities  they  undertook  or  what  amount  of  money  had  been  spent. 
They  merely  took  the  collector's  word  that  something  had  or  had  not 
been  done.  Finally,  they  did  not  develop  a  method  to  insure  that  the 
judgments  of  the  individual  NIOs  were  consistent  with  each  other. 

In  addition,  the  IC  Staff  aggregated  the  amount  of  resources  ex- 
pended by  the  various  collection  and  production  managers  in  answer- 
ing each  KIQ  and  determined  what  problems  had  been  encountered. 
However,  collection  and  production  managers  prepared  cost  estimates 
of  the  activities  expended  against  individual  KIQs  according  to  an 
imprecisely  defined  process.  And  although  the  IC  Staff  provided 
guidance  as  to  how  to  do  the  calculations,  the  decisions  as  to  how  best 
to  estimate  costs  were  left  to  the  individual  agencies.  Not  surprisingly, 
the  agencies  employed  different  methods.^^  Consequently,  the  cost  es- 
timates were  not  comparable  across  agencies,  and  the  IC  Staff  had  no 
way  of  making  them  comparable,  since  they  could  not  change  the  dif- 
ferent accounting  systems  in  the  various  intelligence  agencies.'^ 

In  summary,  the  evaluation  process  did  not  permit  a  comparison 
of  total  efforts  and  results  against  the  KIQs  on  a  community- wide 
basis.  Colby  lacked  the  necessary  tools  to  use  the  KIQ  management 
system  to  effect  resource  allocation  decisions.  The  DCI  at  best  was  in 
a  position  to  shame  recalcitrants  into  action  by  pointing  up  stark  fail- 
ures in  a  particular  agency's  efforts  against  the  KIQs.  The  KIQ  process 
was  only  a  surrogate  for  DCI  authority  to  allocate  the  intelligence 
resources  of  the  community. 

Colby's  frustrations  in  trying  to  direct  intelligence  community 
efforts  via  the  KIQ  process  are  indicative  of  the  DCI's  limited  au- 
thority. Within  the  present  intelligence  structure,  an  effort  to  get  the 
DDO  and  DIA  to  respond  to  what  the  DCI  has  defined  as  key  policy- 
maker intelligence  questions  met  considerable  resistance.  Thus,  the 
most  important  issue  raised  by  the  KIQ  manasfement  experience  is  not 
how  to  refine  the  process  but  whether  the  DCI  can  really  succeed  in 
directing  collection  and  production  activities  in  the  intelligence  com- 
munity toward  critical  policymaker  needs  without  greater  authority 
over  the  allocation  of  resources. 


"For  example,  DIA  begins  with  the  assumption  that  60  percent  of  the  De- 
fense attache  budget  goes  for  collection.  This  figure  is  then  multiplied  by  the 
percentage  of  attache  reports  which  responded  to  KIQs  and  the  total  cost  ex- 
pended against  the  KIQs  was  calculated  to  be  $1.3  million.  In  contrast,  DDO 
calculates  cost  according  to  the  IC  Staff's  recommended  formula,  which  esti- 
mates the  number  of  manhours  devoted  against  the  KIQs  and  multiplies  the  es- 
timate by  an  average  production  manhour  cost. 

^  In  addition,  while  the  State  Department  provides  cost  estimates  of  INR's 
intelligence  production  costs,  it  did  not  submit  collection  cost  statistics,  main- 
taining that  Foreign  Service  reports  were  not  intelligence  collection.  So  the 
evaluation  process  did  not  provide  a  complete  picture  of  intelligence  collection  on 
individual  KIQs. 


93 

5.  President  Ford? 8  Executive  Order 

On  February  18,  1976,  President  Ford  announced  a  reorganization 
of  the  intellicrence  community  to  "establish  policies  to  improve  the 
quality  of  intelligence  needed  for  national  security,  to  clarify  the  au- 
thority and  responsibilities  of  the  intelligence  departments  and  agen- 
cies. .  .  ."  The  major  change  introduced  by  the  President  is  the 
formation  of  the  Committee  on  Foreign  Intelligence  (CFI)  chaired 
by  the  DCI  and  reporting  directly  to  the  NSC.  The  CFI  will  have 
responsibility  to:   (1)   "control  budget  preparation  and  resource  al- 
location for  the  National  Foreign  Intelligence  Program;"  (2)  "estab- 
lish policy  priorities  for  the  collection  and  production  of  national 
intelligence;"  (3)  "establish  policy  for  the  management  of  the  Na- 
tional Foreign  Intelligence  Program;"  and  (4)  "provide  guidance 
on  the  relationship  between  tactical  and  national  intelligence."  ^^ 

It  is  still  too  soon  to  pass  judgment  as  to  whether  the  Executive 
Order  will  aid  the  DCI  in  his  efforts  to  coordinate  the  activities  of  the 
intelligence  community.  By  making  the  DCI  chairman  of  the  CFI, 
the  Executive  Order  appears  to  enhance  the  stature  of  the  DCI  by 
expanding  his  role  in  \h^  allocation  of  national  intelligence  resources. 
But,  as  in  the  case  of  the  Nixon  directive  in  1971,  the  DCI  appears  to 
have  been  given  an  expanded  set  of  responsibilities  without  a  real 
reduction  in  the  authority  of  other  members  of  the  intelligence  com- 
munity over  their  own  operations.  There  exist  many  ambiguities  in  the 
language  of  the  Executive  Order^  particularly  with  regard  to  the  role 
of  the  CFI. 

The  CFI  is  given  responsibility  to  "control  budget  preparation  and 
resource  allocation"  for  national  intelligence  programs,  but  the  Sec- 
retary of  Defense  retains  responsibility  to  "direct,  fund,  and  op- 
erate NSA."  The  CFI  is  asked  to  "review  and  amend"  the  budget 
prior  to  submission  to  0MB,  as  if  the  CFI  will  not  control  the  prep- 
aration of  the  budget  but  rather  would  become  involved  only  after  the 
agencies  and  departments  independently  put  together  their  own 
budget.  Finally,  the  relationship  is  not  clear  between  the  DCI's  re- 
sponsibility to  "ensure  the  development  and  submission  of  a  budget" 
and  the  CFI's  responsibility  to  "control  budget  preparation." 

Moreover,  the  specific  prohibition  against  DCI  and  CFI  responsi- 
bility for  tactical  intelligence  appears  to  be  a  step  backward  from  the 
1971  Nixon  directive  which  asked  the  DCI  to  plan  and  review  the 
allocation  of  all  intelligence  resources.  While  DCIs  since  1971  have 
not  become  deeply  involved  in  such  tactical  intelligence  questions,  they 
have  reserved  the  right  to  become  involved;  and  on  several  occasions 
they  have  supported  efforts  to  transfer  money  from  the  national 
Defense  Department  intelligence  budget  to  the  budgets  of  the  military 
services,  or  vice  versa.  There  are,  in  addition,  at  least  theoretical  trade- 
offs to  be  made  between  tactical  and  national  intelligence,  especially 
since  the  dividing  mark  between  all  intelligence  operations  has  become 
increasingly  blurred  with  the  development  of  large  and  expensive 
technical  collection  systems. 

'*  Executive  Order  No.  11905.  Other  members  of  the  CFI  will  be  the  Deputy 
Secretary  of  Defense  for  Intelligence  and  the  Deputy  Assistant  to  the  President 
for  National  Security  Affairs. 


94 

C.  Director  of  the  CIA 

At  the  same  time  the  DCI  has  responsibility  for  coordinating  the 
activities  of  the  entire  community,  he  also  has  direct  authority  over 
the  intelligence  operations  of  the  CIA.  As  Director,  the  DCI  runs 
covert  operations  and  manages  the  collection  of  clandestine  human 
intelligence  (Directorate  of  Operations)  ;  manages  the  collection  of 
signals  intelligence  abroad  and  allocates  resources  for  the  development 
and  operation  of  certain  technical  collection  systems  (Directorate  of 
Science  and  Technology) ;  and  produces  current  intelligence  and 
finished  intelligence  memoranda  (Directorate  of  Intelligence). 

The  fact  that  the  DCIs  have  also  directed  the  operations  of  the 
CIA  has  had  a  variety  of  consequences.  First,  DCIs  have  tended  to 
focus  most  of  their  attention  on  CIA  operations.  The  first  Directors 
were  preoccupied  with  organizing  and  establishing  CIA  and  with 
defining  the  Agency's  role  in  relation  to  the  other  intelligence  orga- 
nizations. While  Allen  Dulles  and  Richard  Helms  were  DCI,  each 
spent  considerable  time  running  covert  operations.  John  McCone 
focused  on  improving  the  ClA's  intelligence  product  and  developing 
new  technical  collection  systems  when  he  was  Director.  Admiral 
Rabom  emphasized  refining  the  Agency's  budgetary  procedures.*'" 

Second,  by  having  their  own  capabilities  to  collect  and  produce 
intelligence,  DCIs  have  been  able  to  assert  their  influence  over  the 
intelligence  activities  of  the  other  members  of  the  intelligence  com- 
munity. John  Clarke,  former  Associate  Deputy  to  the  DCI  for  the 
Intelligence  Community,  testified  that  Helms  objected  to  the  sugges- 
tion that  CIA  get  rid  of  all  its  SIGINT  activities  because  he  needed 
"something  to  keep  [his]  foot  in  the  door"  so  he  could  "look  at  the 
bigger  problem."  ^'^  According  to  Clarke : 

...  to  some  degree  historically,  the  Director's  involvement 
has  not  only  been  based  upon  good,  healthy  competition 
among  systems,  which  I  think  is  good,  but  the  directors  have 
seen  it  as  an  opportunity  to  give  them  a  voice  at  the  table  in 
judgments  which  have  importance  to  their  higher  role,  a 
larger  role  as  Director  of  CI.^^ 

However,  this  ability  to  assert  influence  in  turn  has  had  another 
consequence:  DCIs  have  been  accused  of  not  being  able  to  nlay  an 
objective  role  as  community  leader  while  they  have  responsibility  for 
directing  one  of  the  community's  intelligence  agencies.  Potential  con- 
flict exists  in  decisions  with  respect  to  every  CIA  activity.  For  ex- 
ample, on  each  of  the  two  occasions  that  the  DCI  went  directly  to  the 
President  to  object  to  a  Defense  Department  budget  recommendation, 
the  DCI  won  Presidential  support  for  a  CIA-developed  technical 
collection  system.  Such  DCI  advocacy  raises  the  fundamental  ques- 
tion of  whether  the  DCI  can  indeed  b©  an  objective  community  leader 
if  he  is  also  Director  of  the  CIA  which  undertakes  research  and  devel- 
opment on  technical  collection  systems.  According  to  James 
Schlesinger : 

There  has  always  been  concern  and  frequently  there  has 
been  the  reality  that  the  DCI  does  not  overlook  all  these 


*"•  Colby,  12/11/75,  pp.  4-5. 
"^  Clarke,  2/5/76,  p.  59. 
"  Ibid.,  pp.  59-60. 


95 

assets  in  a  balanced  way  ...  as  long  as  the  DCI  has  special 
responsibility  for  the  management  of  clandestine  activities, 
that  it  tends  to  affect  and  to  some  extent  contaminate  his 
ability  to  be  a  spokesman  of  the  commimity  as  a  whole  in- 
volving intelligence  operations  which  are  regarded  as  reason- 
ably innocent  from  the  purview  of  American  life. 

Components  of  the  intelligence  community  other  than 
the  CIA  have  feared  that  the  DCI  would  be  tempted  to 
expand  the  authority  of  the  CIA  in  the  collection  activities 
relative  to  the  other  components  of  the  intelligence  com- 
munity. And  there  has  been  some  evidence  that  supports  such 
suspicion.  .  .  . 

What  I  believe  is  at  the  present  time  you  have  got  incon- 
sistent expectations  of  the  DCI.  He's  supposed  to  be  the  fair 
judge  amongst  the  elements  of  the  intelligence  community 
at  the  same  time  that  CIA  personnel  expect  him  to  be  a 
special  advocate  for  the  CIA.  You  cannot  have  both  roles.^^ 

President  Ford's  Executive  Order  seeks  in  part  to  reduce  the  conflict 
of  interest  problem  by  establishing  two  Deputies  to  the  DCI,  one  for 
intelligence  community  affairs  and  one  for  CIA  operations.  The  DCI 
and  his  Deputy  for  commimity  affairs  will  have  offices  in  downtown 
Washington.  Nevertheless,  the  DCI  will  continue  to  have  an  office  at 
CIA  headquarters  and  to  have  legal  responsibility  for  the  operations 
of  the  Agency  and  at  the  same  time  general  responsibility  for  coordi- 
nating the  activities  of  the  entire  intelligence  community. 

"^  Schlesinger,  2/2/76,  pp.  8,  49. 


VI.  HISTORY  OF  THE  CENTRAL  INTELLIGENCE  AGENCY 

Introduction  ^ 

The  current  political  climate  and  the  mystique  of  secrecy  surround- 
ing the  intelligence  profession  have  created  misperceptions  about  the 
Central  Intelligence  Agency.  The  CIA  has  come  to  be  viewed  as  an 
unfettered  monolith,  defining  and  determining  its  activities  independ- 
ent of  other  elements  of  government  and  of  the  direction  of  American 
foreign  policy.  This  is  a  distortion.  During  its  twenty-nine  year  his- 
tory, the  Agency  has  been  shaped  by  the  course  of  international  events, 
by  pressures  from  other  government  agencies,  and  by  its  own  internal 
norms.  An  exhaustive  history  of  the  CIA  would  demand  an  equally 
exhaustive  history  of  American  foreign  policy,  the  role  of  Congress 
and  the  Executive,  the  other  components  of  the  intelligence  community, 
and  an  examination  of  the  interaction  among  all  these  forces.  Given 
the  constraints  of  time  and  the  need  to  pursue  other  areas  of  research, 
this  was  an  impossible  task  for  the  Committee.  Nonetheless,  recogniz-." 
ing  the  multiple  influences  that  have  contributed  to  the  Agency's  de- 
velopment, the  Committee  has  attempted  to  broadly  outline  the  CIA's 
organizational  evolution. 

An  historical  study  of  this  nature  serves  two  important  purposes. 
First,  it  provides  a  means  of  understanding  the  Agency's  present  struc- 
ture. Second,  and  more  importantly,  by  analyzing  the  causal  elements 
in  the  CIA's  patterns  of  activity,  the  study  should  illuminate  the  pos- 
sibilities for  and  the  obstacles  to  future  reform  in  the  U.S.  foreign 
intelligence  system. 

The  concept  of  a  peacetime  central  intelligence  organization  had 
its  origins  in  World  War  II  with  the  Office  of  Strategic  Services 
(OSS).  Through  the  driving  initiative  and  single-minded  determina- 
tion of  General  William  J.  Donovan,  sponsor  and  later  first  director 
of  OSS,  the  organization  became  the  United  States'  first  central  in- 
telligence body.  Although  OSS  was  disbanded  in  1945  and  its  func- 

^  This  section  is  the  summary  version  of  a  longer  history  to  be  published  as  an 
Appendix  to  the  Committee's  Final  Report.  This  section  and  the  longer  history 
are  based  on  four  principal  groups  of  sources.  Since  classification  restrictions  pre- 
vent citing  individual  sources  directly,  the  categories  of  sources  are  identified  as 
follows  :  ( 1 )  approximately  seventy-five  volumes  from  the  series  of  internal  CIA 
histories,  a  rich  if  uneven  collection  of  studies,  which  deal  with  individual  com- 
ponents of  the  CIA,  the  administrations  of  the  Directors  of  Central  Intelligence, 
and  specialized  areas  of  intelligence  analysis.  The  histories  have  been  compiled 
since  the  late  1940's  and  constitute  a  unique  institutional  memory.  (2)  approxi- 
mately sixty  interviews  with  present  and  retired  Agency  employees.  These  in- 
terviews were  invaluable  in  providing  depth  of  insight  and  understanding  to  the 
organization.  (3)  special  studies  and  reports  conducted  both  within  and  outside 
the  Agency.  They  comprise  reviews  of  functional  areas  and  of  the  overall  admin- 
istration of  the  CIA.  (4)  documents  and  statistics  supplied  to  the  Select  Commit- 
tee by  the  CIA  in  response  to  specific  requests.  They  include  internal  communica- 
tions, budgetary  allocations,  and  information  on  grade  levels  and  personnel 
strengths. 

(97) 


98 

tional  components  reassigned  to  other  government  agencies,  the  exist- 
ence of  OSS  was  important  to  the  CIA,  First,  OSS  provided  an  orga- 
nizational precedent  for  the  CIA ;  like  OSS,  the  CIA  included  clandes- 
tine collection  and  operations  and  intelligence  analysis.  Second,  many 
OSS  personnel  later  joined  the  CIA;  in  1947,  the  year  of  the  CIA's 
establishment,  approximately  one-third  of  the  CIA's  personnel  were 
OSS  veterans.  Third,  OSS  suffered  many  of  tiie  same  problems 
later  experienced  by  the  CIA;  both  encountered  resistance  to  the 
execution  of  their  mission  from  other  government  agencies,  both  ex- 
perienced the  difficulty  of  having  their  intelligence  analysis  "heard," 
and  both  were  characterized  by  the  dominance  of  their  clandestine  op- 
erational components. 

Despite  the  similarities  in  the  two  organizations,  OSS  was  an  in- 
strument of  war,  and  Donovan  and  his  organization  were  regarded  by 
many  as  a  group  of  adventurers,  more  concerned  with  derring-do  op- 
erations than  with  intelligence  analysis.  The  post-war  organization 
emerged  from  different  circumstances  from  those  that  had  fostered 
the  development  of  OSS. 

Following  the  War,  American  policymakers  conceived  the  idea 
of  a  peacetime  central  intelligence  organization  with  a  specific  pur- 
pose in  mind — to  provide  senior  government  officials  with  high-quality, 
objective  intelligence  analysis.  At  the  time  of  the  new  agency's  crea- 
tion, the  military  services  and  the  State  Department  had  their  own 
independent  intelligence  capabilities.  However,  the  value  of  their  anal- 
ysis was  limited,  since  their  respective  policy  objectives  often  skewed 
their  judgments.  By  reviewing  and  synthesizing  the  data  collected  by 
the  State  Department  and  the  military  services,  a  centralized  body  was 
intended  to  produce  national  intelligence  estimates  independent  of 
policy  biases.  "National"  intelligence  meant  integrated  interdepart- 
mental intelligence  that  exceeded  the  perspective  and  competence  of 
individual  departments  and  that  covered  the  broad  aspects  of  national 
policy.  "Estimates"  meant  predictive  judgments  on  the  policies  and 
motives  of  foreign  governments  rather  than  descriptive  summaries 
of  daily  events  or  "current  intelligence." 

Although  policymakers  agreed  on  the  necessity  for  national  intel- 
ligence estimates,  they  did  not  anticipate  or  consider  the  constraints 
that  would  impede  achievement  of  their  objective.  As  a  result,  the  CIA 
assumed  functions  very  different  from  its  principal  mission,  becoming 
a  competing  producer  of  current  intelligence  and  a  covert  operational 
instrument  in  the  American  cold  war  offensive. 

The  establishment  of  the  Central  Intelligence  Agency  coincided 
with  the  emergence  of  the  Soviet  Union  as  the  antagonist  of  the  United 
States.  This  was  the  single  most  important  external  factor  in  shaping 
the  Agency's  development.  Of  equal  importance  were  the  internal  orga- 
nizational arrangements  that  determined  the  patterns  of  influence 
within  the  Agency.  In  exploring  the  Agency's  complex  development, 
this  summary  will  address  the  following  questions :  Wliat  institutional 
and  jurisdictional  obstacles  prevented  the  Agency  from  fulfilling  its 
original  mission?  To  what  extent  have  these  obstacles  persisted?  In 
what  ways  have  U.S.  foreign  policy  objectives  influenced  priorities  in 
the  Agency's  activities  ?  Wliat  internal  arrangements  have  determined 
the  Agency's  emphases  in  intelligence  production  and  in  clandestine 


99 

activities?  What  accounts  for  the  continued  dominance  of  the  clan- 
destine component  within  the  Agency  ?  How  have  individual  Directors 
of  Central  Intelligence  defined  their  roles  and  what  impact  have  their 
definitions  had  on  the  direction  of  the  Agency?  What  impact  did 
technological  developments  have  on  the  Agency  and  on  the  Agency's 
relationship  with  the  departmental  intelligence  services  ? 

This  study  is  not  intended  to  catalogue  the  CIA's  covert  operations 
but  to  present  an  analytical  framework  within  which  the  CIA's  poli- 
cies and  practices  may  be  understood.  The  following  section  summa- 
rizes the  Agency's  evolution  by  dividing  its  history  into  four  segments : 
1946-1952;  1953-1961;  1962-1970;  and  1971-1975.  Each  period  con- 
stitutes a  distinct  phase  in  the  Agency's  development. 

A.  The  Central  Intelligence  Group  and  the  Central  Intelligence 

Agency:  1946-1952 

The  years  1946  to  1952  were  perhaps  the  most  crucial  in  deter- 
mining the  functions  of  the  central  intelligence  organization.  The 
period  marked  a  dramatic  transformation  in  the  mission,  size  and 
structure  of  the  new  entity.  In  1946  the  Central  Intelligence  Group 
(CIG),  the  CIA's  predecessor,  was  conceived  and  established  as  an 
intelligence  coordinating  body  to  minimize  the  duplicative  efforts  of 
the  Departments  and  to  provide  objective  intelligence  analysis  to  senior 
policymakers.  By  1952  the  Central  Intelligence  Agency  was  engaged 
in  independent  intelligence  production  and  covert  operations.  The  CIG 
was  an  extension  of  Executive  departments ;  its  personnel  and  budget 
were  allocated  from  State,  Army  and  Navy.  By  1952  the  CIA  had 
developed  into  an  independent  government  agency  commanding  man- 
power and  budget  far  exceeding  anything  originally  imagined. 

1.  The  Origins  of  the  Central  Intelligence  Group 

As  World  War  II  ended,  new  patterns  of  decisionmaking  emerged 
within  the  United  States  Government.  In  the  transition  from  war 
to  peace  policymakers  were  redefining  their  organizational  and  in- 
formational needs.  As  President,  Franklin  Roosevelt  maintained  a 
highly  personalized  style  of  decisionmaking,  relying  primarily  on  in- 
formal conversations  with  senior  officials.  Truman  preferred  to  confer 
with  his  cabinet  officers  as  a  collective  body.  This  meant  that  officials 
in  the  State,  War  and  Navy  departments  were  more  consistent  partici- 
pants in  Presidential  decisions  than  they  had  been  under  Roosevelt. 
From  October  through  December  1945,  U.S.  Government  agencies 
engaged  in  a  series  of  policy  debates  about  the  necessity  for  and  the 
nature  of  the  future  United  States  intelligence  capability. 

Three  major  factors  dominated  the  discussions.  The  first  was  the 
issue  of  postwar  reorganization  of  the  Executive  branch.  The  debate 
focussed  around  the  question  of  an  independent  Air  Force  and  the 
unification  of  the  services  under  a  Department  of  Defense.  Discussion 
of  a  separate  central  intelligence  agency  and  its  structure,  authority, 
and  accountability  was  closely  linked  to  the  larger  problem  of  defense 
reorganization. 

Second,  it  was  clear  from  the  outset  that  no  department  was  willing 
to  consider  resigning  its  existing  intelligence  function  and  accompany- 


100 

ing  personnel  and  budgetary  allotments  to  a  central  agency.  As 
departmental  representatives  aired  their  preferences,  maintenance  of 
independent  capabilities  was  an  accepted  element  in  defining  future 
organization.  Coordination,  not  centralization,  was  the  maximum  that 
each  Department  was  willing  to  concede. 

Third,  the  functions  under  discussion  were  intelligence  analysis  and 
the  dissemination  of  intelligence.  The  shadow  of  the  Pearl  Harbor 
disaster  dominated  policymakers'  thinking  about  the  purpose  of  a 
central  intelligence  agency.  They  saw  themselves  rectifying  the  condi- 
tions that  allowed  Pearl  Harbor  to  happen — a  fragmented  military- 
based  intelligence  apparatus  which  in  current  terminology  could  not 
distinguish  "signals"  from  "noise,"  let  alone  make  its  assessments 
available  to  senior  officials. 

Formal  discussion  on  the  subject  of  the  central  intelligence  func- 
tion began  in  the  fall  of  1945.  The  Departments  presented  their  sep- 
arate views,  while  two  independent  studies  also  examined  the  issue. 
Inherent  in  all  of  the  recommendations  was  the  assumption  that  the 
Departments  would  control  the  intelligence  product.  None  advocated 
giving  a  central  independent  group  sole  responsibility  for  collection 
and  analysis.  All  favored  making  the  central  intelligence  body  re- 
sponsible to  the  Departments  themselves  rather  than  to  the  President. 
Each  Department  lobbied  for  an  arrangement  that  would  give  itself 
an  advantage  in  intelligence  coordination. 

The  Presidential  directive  establishing  the  Central  Intelligence 
Group  reflected  these  preferences.  The  Departments  retained  autonomy 
over  their  intelligence  services,  and  the  CIG's  budget  and  staff  were 
to  be  drawn  from  the  separate  agencies.  Issued  on  January  22,  1946, 
the  directive  provided  the  CIG  with  a  Director  chosen  by  the  Presi- 
dent. The  CIG  was  responsible  for  coordination,  planning,  evaluation, 
and  dissemination  of  intelligence.  The  National  Intelligence  Au- 
thority (NIA),  a  group  comprised  of  the  Secretary  of  State,  the 
Secretary  of  War,  the  Secretary  of  the  Navy,  and  a  personal  repre- 
sentative of  the  President  served  as  the  Group's  supervisory  body. 
The  Intelligence  Advisorv  Board  (lAB),  which  included  the  heads 
of  the  militarv  and  civilian  intelligence  agencies,  was  an  advisory 
group  to  the  Director  of  Central  Intelligence   (DCI). 

Through  budget,  personnel,  and  oversight,  the  Departments  had 
assured  control  over  the  Central  Intelligence  Group.  The  CIG  was 
a  creature  of  departments  that  were  determined  to  maintain  inde- 
pendent capabilities  as  well  as  their  direct  advisory  relationship  to 
the  President.  In  Januarv  1946  they  succeeded  in  doing  both;  by  re- 
taining autonomy  over  their  intelligence  operations,  they  established 
the  strone:  institutional  claims  that  would  persist  for  the  lifetime 
of  the  Central  Intelligence  Agency. 

^.  The  Directors  of  Central  Intelligence^  19^6-1952 

At  a  time  when  the  new  agency  was  developing  its  mission,  the  role 
of  its  senior  official  was  crucial.  The  Director  of  Central  Intelligence 
was  responsible  for  representing  the  agency's  interests  to  the  Depart- 
ments and  for  pressing  its  jurisdictional  claims.  In  large  part  the 
strength  of  the  agency  relative  to  the  Departments  was  dependent  on 
the  stature  that  the  DCI  commanded  as  an  individual.  The  four  DCIs 


101 

from  1946  to  1952  rang^ed  from  providing  only  weak  leadership  to 
firmly  solidifying  the  new  organization  in  the  Washington  bureauc- 
racy. Three  of  the  four  men  were  career  military  officers.  Their  appoint- 
ments were  indicative  of  the  degree  of  control  the  military  services 
managed  to  retain  over  the  agency  and  the  acceptance  of  the  services' 
primary  role  in  the  intelligence  process. 

Sidney  Souers,  the  first  DCI,  served  from  January  to  June  1946. 
Though  a  rear  admiral,  he  was  not  a  military  careerist  but  a  business 
executive,  who  had  spent  his  wartime  service  in  naval  intelligence. 
He  accepted  the  job  with  the  understanding  that  he  would  remain 
only  long  enough  to  establish  an  organization.  Having  participated 
in  the  drafting  of  the  directive  which  created  CIG,  Souers  had  a  fixed 
concept  of  the  central  intelligence  function — one  that  did  not  chal- 
lenge the  position  of  the  departmental  intelligence  components. 

Under  Lieutenant  General  Hoyt  Vandenberg,  CIG  moved  beyond 
production  of  coordinated  intelligence  to  acquire  a  clandestine  col- 
lection capability  as  well  as  authority  to  conduct  independent  re- 
search and  analysis.  Vandenberg  was  an  aggressive,  ambitious  per- 
sonality, and  as  the  nephew  of  Arthur  Vandenberg,  Chairman  of  the 
Senate  Foreign  Relations  Committee,  exerted  considerable  influence 
on  behalf  of  the  CIG.  In  May  1947,  Vandenberg  was  succeeded  by 
Rear  Admiral  Roscoe  Hillenkoetter.  Two  months  after  Hillenkoetter's 
appointment,  the  CIG  was  reconstituted  as  the  Central  Intelligence 
Agency.  Hillenkoetter  did  not  command  the  personal  stature  to  suc- 
cessfully assert  the  Agency's  position  relative  to  the  Departments. 
Nor  did  he  possess  the  administrative  ability  to  manage  the  Agency's 
rapidly  expanding  functions. 

It  was  precisely  because  of  Hillenkoetter's  weakness  that  General 
Walter  Bedell  Smith  was  selected  to  succeed  him  in  October  1950. 
Nicknamed  "the  American  Bulldog"  by  Winston  Churchill,  Smith  was 
a  tough-minded,  hard-driving,  often  intimidating  career  military  of- 
ficer who  effected  major  organizational  changes  during  his  tenure. 
Smith's  temperament  and  his  senior  military  status  made  him  one  of 
the  strongest  DCIs  in  the  Agency's  history.  He  left  the  Agency  in 
February  1953. 

3.  The  Evolution  of  the  Central  Intelligence  Function^  19Jt.6-1952 

The  CIG  had  been  established  to  rectify  the  duplication  among 
the  military  intelligence  services  and  to  compensate  for  their  biases. 
The  rather  vaguely  conceived  notion  was  that  a  small  staff  in  the  CIG 
would  assemble  and  review  the  raw  data  collected  by  the  departmental 
intelligence  services  and  produce  objective  national  estimates  for  the 
use  of  senior  American  policymakers.  Although  in  theory  the  concept 
was  reasonable  and  derived  from  informational  needs,  institutional 
resistance  make  implementation  virtually  impossible.  The  depart- 
mental services  jealously  guarded  both  their  information  and  what 
they  believed  were  their  preroo:atives  in  providing  policy  guidance  to 
the  President,  making  the  CIG's  primary  mission  an  exercise  in  futil- 
ity. Limited  in  the  execution  of  its  responsibility  for  coordinated  esti- 
mates, the  CIG  emerged  within  a  year  as  a  current  intelligence 
producer,  generating  its  own  summaries  of  daily  events  and  thereby 
competing  with  the  Departments  in  the  dissemination  of  information. 


102 

An  important  factor  in  the  change  was  the  CIG's  authorization  to 
carry  out  independent  research  and  analysis  "not  being  presently  per- 
formed" by  the  other  Departments.  Under  this  authorization,  granted 
in  the  spring  of  1946,  the  Office  of  Reports  and  Estimates  (ORE)  was 
established.  ORE's  functions  were  manifold — the  production  of  na- 
tional current  intelligence,  scientific,  technical,  and  economic  in- 
telligence as  well  as  interagency  coordination  for  national  estimates. 
With  its  own  research  and  analysis  capability,  the  CIG  could  carry 
out  an  independent  intelligence  function  without  having  to  rely  on  the 
departments  for  data.  The  change  made  the  CIG  an  intelligence  pro- 
ducer, while  still  assuming  the  continuation  of  its  role  as  a  coordina- 
tor for  estimates. 

Yet  acquisition  of  a  research  and  analysis  role  meant  that  inde- 
pendent production  would  outstrip  coordinated  intelligence  as  a 
primary  mission.  Fundamentally,  it  would  be  far  easier  to  assimilate 
and  analyze  data  than  it  had  been  or  would  be  to  engage  the  Depart- 
ments in  producing  "coordinated"  analysis. 

The  same  1946  directive  which  provided  the  CIG  with  an  independ- 
ent research  and  analysis  capability  also  granted  the  CIG  a  clandestine 
collection  capability.  Since  the  end  of  the  war,  the  remnant  of  OSS's 
clandestine  collection  capability  rested  with  the  Strategic  Services 
Unit  (SSU) ,  then  in  the  War  Department.  In  the  postwar  dismantling 
of  OSS,  SSU  was  never  intended  to  be  more  than  a  temporary  body, 
and  in  the  spring  of  1946  SSU's  duties,  responsibilities  and  personnel 
were  transferred  to  CIG  along  with  SSU's  seven  overseas  field  stations 
and  communications  and  logistical  apparatus. 

The  transfer  resulted  in  the  establishment  of  the  Office  of  Special 
Operations  (OSO).  OSO  was  responsible  for  espionage  and  counter- 
espionage. From  the  beginning  the  data  collected  by  OSO  was  highly 
compartmented.  ORE  did  not  draw  on  OSO  for  its  raw  information. 
Instead,  overt  collection  was  ORE's  major  source  of  data. 

Since  its  creation  CIG  had  had  two  overt  collection  components. 
The  Domestic  Contact  Service  (DCS)  solicited  domestic  sources,  in- 
cluding travellers  and  businessmen  for  foreign  intelligence  informa- 
tion on  a  voluntary  basis.  The  Foreign  Broadcast  Information  Service 
(FBIS)  an  element  of  OSS,  monitored  overseas  broadcasts.  These 
components  together  with  foreign  publications  provided  ORE  with 
most  of  its  basic  information. 

The  acquisition  of  a  clandestine  collection  capability  and  authoriza- 
tion to  carry  out  independent  research  and  analysis  enlarged  CIG's 
personnel  strength  considerably.  As  of  June  1946  the  total  CIG  staff 
numbered  approximately  1,816.  Proportionately,  approximately  one- 
third  were  overseas  with  OSO.  Of  those  stationed  in  Washington, 
approximately  half  were  devoted  to  administrative  and  support  func- 
tions, one-third  were  assigned  to  OSO,  and  the  remainder  to  intelli- 
gence production. 

The  passage  of  the  National  Security  Act  in  July  1947  legislated 
the  changes  in  the  Executive  branch  that  had  been  under  discussion 
since  1945.  The  Act  established  an  independent  Air  Force,  provided 
for  coordination  by  a  committee  of  service  chiefs,  the  Joint  Cliiefs  of 
Staff  (JCS),  and  a  Secretaiy  of  Defense,  and  created  the  National 


103 

Security  Council  (NSC).  The  CIG  became  an  independent  depart- 
ment and  was  renamed  the  Central  Intelligence  Agency. 

Under  the  Act,  the  CIA's  mission  was  only  loosely  defined,  since 
efforts  to  thrash  out  the  CIA's  duties  in  specific  terms  would  have  con- 
tributed to  the  tension  surrounding  the  unification  of  the  services.  The 
four  general  tasks  assigned  to  the  Agency  were  (1)  to  advise  the  NSC 
on  matters  related  to  national  security;  (2)  to  make  recommendations 
to  the  NSC  regarding  the  coordination  of  intelligence  activities  of  the 
Departments;  (3)  to  correlate  and  evaluate  intelligence  and  provide 
for  its  appropriate  dissemination  and  (4)  "to  perform  such  other 
functions  ...  as  the  NSC  will  from  time  to  time  direct. ..." 

The  Act  did  not  alter  the  functions  of  the  CIG.  Clandestine  collec- 
tion, overt  collection,  production  of  national  current  intelligence  and 
interagency  coordination  for  national  estimates  continued,  and  the  per- 
sonnel and  internal  structure  remained  the  same. 

The  Act  affirmed  the  CIA's  role  in  coordinating  the  intelligence 
activities  of  the  State  Department  and  the  military — determining 
which  activities  would  most  appropriately  and  most  efficiently  be 
conducted  by  which  Departments  to  avoid  duplication.  In  1947  the 
Intelligence  Advisory  Committee  (lAC)  was  created  to  serve  as  a 
coordinating  body  in  establishing  intelligence  requirements  ^  among 
the  Departments.  Chaired  by  the  DCI,  the  Committee  included  repre- 
sentatives from  the  Departments  of  State,  Army,  Air  Force,  the  Joint 
Chiefs  of  Staff,  and  the  Atomic  Energy  Commission.  Although  the 
DCI  was  to  establish  priorities  for  intelligence  collection  and  analysis, 
he  did  not  have  the  budgetary  or  administrative  authority  to  control 
the  departmental  components.  Moreover,  no  Department  was  willing 
to  compromise  what  it  perceived  as  its  own  intelligence  needs  to 
meet  the  collective  needs  of  policymakers  as  defined  by  the  DCI. 

As  the  CIA  evolved  between  1947  and  1950,  it  never  fulfilled  its 
estimates  function  but  continued  to  expand  its  independent  intelligence 
production.  In  July  1949  an  internal  study  conducted  by  a  senior 
ORE  staff  member  stated  that  ORE's  emphasis  in  production  had 
shifted  "from  the  broad  long-term  type  of  problem  to  a  narrowly 
defined  short-term  type  and  from  the  predictive  to  the  non-predictive 
type."  In  1949  ORE  had  eleven  regular  publications.  Only  one  of 
these  addressed  national  intelligence  questions  and  was  published 
with  the  concurrence  or  dissent  of  the  other  departments.  Less  than 
one-tenth  of  ORE's  products  were  serving  the  purpose  for  which  the 
CIG  and  the  CIA  had  been  created. 

If..  The  Reorganization  of  the  Intelligence  Function^  1950 

By  the  time  Walter  Bedell  Smith  became  DCI  in  1950,  it  was  clear 
that  the  CIA's  record  on  the  production  of  national  intelligence  esti- 
mates had  fallen  far  short  of  expectation.  ORE  had  become  a  direc- 
tionless service  organization,  attempting  to  answer  requirements  levied 
by  all  agencies  related  to  all  manner  of  subjects — politics,  economics, 
science,  and  technology.  The  wholesale  growth  had  only  confused 
ore's  mission  and  led  the  organization  into  attempting  analysis  in 
areas  already  adequately  covered  by  other  departments.  Likewise,  the 

^  Requirements  constitute  the  informational  objectives  of  intelligence  collec- 
tion, e.g.,  in  1947  determining  Soviet  troop  strengths  in  iJastern  Europe. 


104 

obstacles  posed  by  the  Departments  prevented  the  DCI  and  the 
Agency  from  carrying  out  coordination  of  the  activities  of  the  depart- 
mental intelligence  components. 

These  problems  appeared  more  stark  following  the  outbreak  of 
the  Korean  War  in  June  1950.  Officials  in  the  Executive  branch  and 
members  of  Congress  criticized  the  Agency  for  its  failure  to  predict 
more  specifically  the  timing  of  the  North  Korean  invasion  of  South 
Korea.  Immediately  after  his  appointment  as  DCI  in  October  1950, 
Smith  discovered  that  the  Agency  had  no  current  coordinated  esti- 
mate of  the  situation  in  Korea.  Under  the  pressure  of  war,  demands 
for  information  were  proliferating,  and  it  was  apparent  that  ORE 
could  not  meet  those  demands. 

Smith  embarked  on  a  program  of  reorganization.  His  most  signifi- 
cant change  was  the  creation  of  the  Office  of  National  Estimates 
(ONE),  whose  sole  purpose  was  to  produce  National  Intelligence 
Estimates  (NIEs) .  There  were  two  components  in  ONE,  a  staff  which 
drafted  the  estimates  and  a  senior  body,  known  as  the  Board  of  Na- 
tional Estimates,  which  reviewed  the  estimates,  coordinated  the  judg- 
ments with  other  agencies,  and  negotiated  over  their  final  form. 

Smith  also  attempted  to  redefine  the  DCI's  position  in  relation  to 
the  departmental  intelligence  components.  From  1947  to  1950  the  DCIs 
had  functioned  at  the  mercy  of  the  Departments  rather  than  exercising 
direction  over  them.  By  formally  stating  his  position  as  the  senior 
member  of  the  Intelligence  Advisory  Committee,  Smith  tried  to  as- 
sume a  degree  of  administrative  control  over  departmental  activities. 
Nonetheless,  the  obstacles  remained,  and  personal  influence,  rather 
than  recognized  authority,  determined  the  effectiveness  of  Smith  and 
his  successors  in  interdepartmental  relationships. 

In  January  1952,  CIA's  intelligence  functions  were  grouped  under 
the  Directorate  for  Intelligence  (DDI),  ORE  was  dissolved  and 
its  personnel  were  reassigned.  In  addition  to  ONE,  the  DDI's 
intelligence  production  components  included :  the  Office  of  Research 
and  Reports  (ORR),  which  handled  economic  and  geographic  intelli- 
gence; the  Office  of  Scientific  Intelligence  (OSI),  which  engaged  in 
basic  scientific  research ;  and  the  Office  of  Current  Intelligence  (OCI) , 
which  provided  current  political  research.  Collection  of  overt  infor- 
mation was  the  responsibility  of  the  Office  of  Operations  (00).  The 
Office  of  Collection  and  Dissemination  (OCD)  engaged  in  the  dis- 
semination of  intelligence  as  well  as  storage  and  retrieval  of  un- 
evaluated  intelligence. 

The  immediate  pressures  for  information  generated  by  the  Korean 
War  resulted  in  continued  escalation  in  size  and  intelligence  produc- 
tion. Government-wide  demands  for  the  Agency  to  provide  informa- 
tion on  Communist  intentions  in  the  Far  East  and  around  the  world 
justified  the  increases.  By  the  end  of  1953  DDI  personnel  numbered 
3,338.  Despite  the  sweeping  changes,  the  fundamental  problem  of 
duplication  among  the  Agency  and  the  Departments  remained.  DDI's 
major  effort  was  independent  intelligence  production  rather  than  co- 
ordinated national  estimates. 

5.  Clandestine  Operations 

The  concept  of  a  central  intelligence  agency  developed  out  of  a 
concern  for  the  quality  of  intelligence  analysis  available  to  policy- 


105 

makers.  The  1945  discussion  which  surrounded  the  creation  of  the  CIG 
focussed  exclusively  on  the  problem  of  production  of  coordinated  intel- 
ligence judgments.  Tavo  years  later,  debates  on  the  CIA  in  both  the 
Congress  and  the  Executive  assumed  only  a  collection  and  analysis 
role  for  the  newly  constituted  Agency.  Yet,  within  one  year  of  the 
passage  of  the  National  Security  Act,  the  CIA  was  charged  with  the 
conduct  of  covert  psychological,  political,  paramilitary,  and  economic 
activities.^  The  acquisition  of  this  mission  had  a  profound  impact  on 
the  direction  of  the  Agency  and  on  its  relative  stature  within  the 
government. 

The  suggestion  for  the  initiation  of  covert  operations  did  not  origi- 
nate in  the  CIA,  but  with  senior  U.S.  officials,  among  them  Secretary 
of  War  James  Patterson,  Secretary  of  Defense  James  Forrestal,  Sec- 
retary of  State  George  Marshall,  and  George  Kennan,  Director  of  the 
State  Department's  Policy  Planning  Staff.  Between  1946  and  1948 
policymakers  proceeded  from  a  discussion  of  the  possibility  of  initiat- 
ing covert  psychological  operations  to  the  establishment  of  an  organi- 
zation to  conduct  a  full  range  of  covert  activities.  The  decisions  were 
gradual  but  consistent,  spurred  on  by  the  growing  concern  over  Soviet 
intentions. 

By  late  1946  cabinet  officials  were  preoccupied  with  the  Soviet 
threat,  and  over  the  next  year  their  fears  intensified.  For  U.S.  policy- 
makers, international  events  seemed  to  be  a  sequence  of  Soviet  incur- 
sions. In  March  1946  the  Soviet  Union  refused  to  withdraw  its  troops 
from  the  Iranian  province  of  Azerbaijan;  two  months  later  civil  war 
involving  Communist  rebel  forces  erupted  in  Greece.  In  1947  Com- 
munists assumed  power  in  Poland,  Hungary  and  Rumania,  and  in  the 
Philippines  the  government  was  under  attack  by  the  Hukbalahaps,  a 
communist-led  guerrilla  group.  In  February  1948  Communists  staged 
a  successful  coup  in  Czechoslovakia.  At  the  same  time  France  and 
Italy  were  beleaguered  by  a  wave  of  Communist-inspired  strikes.  Poli- 
cymakers could,  and  did,  look  at  these  developments  as  evidence  of 
the  need  for  the  United  States  to  respond. 

In  March  1948  near  hysteria  gripped  the  U.S.  Government  with 
the  so-called  "war  scare."  The  crisis  was  precipitated  by  a  cable  from 
General  Lucius  Clay,  Commander  in  Chief,  European  Command,  to 
Lt.  General  Stephen  J.  Chamberlin,  Director  of  Intelligence,  Army 
General  Staff,  in  which  Clay  said,  "I  have  felt  a  subtle  change  in 
Soviet  attitude  which  I  cannot  define  but  which  now  gives  me  a  feeling 
that  it  [war]  may  come  with  dramatic  suddenness."  The  war  scare 
launched  a  series  of  interdepartmental  intelligence  estimates  on  the 
likelihood  of  a  Soviet  attack  on  Western  Europe  and  the  United 
States.  Although  the  estimates  concluded  that  there  was  no  evidence 
the  U.S.S.R.  would  start  a  war.  Clay's  cable  had  articulated  the  degree 
of  suspicion  and  outright  fear  of  the  Soviet  Union  that  was  shared 
by  policymakers  in  1948. 

For  U.S.  officials,  the  perception  of  the  Soviet  Union  as  a  global 
threat  demanded  new  modes  of  conduct  in  foreign  policy  to  supple- 


*  Psychological  oi)erations  were  primarily  media-related  activities,  including 
unattributed  publications,  forgeries,  and  subsidization  of  publications ;  jwlitical 
action  involved  exploitation  of  dispossessed  persons  and  defectors,  and  support  to 
political  parties ;  paramilitary  activities  included  support  to  guerrillas  and  sabo- 
tage ;  economic  activities  consisted  of  monetary  and  fiscal  operations. 


3-983  O  -  76  -  8 


106 

ment  the  traditional  alternatives  of  diplomacy  and  war.  Massive 
economic  aid  represented  one  new  method  of  achieving  U.S.  foreign 
policy  objectives.  In  1947  the  United  States  had  embarked  on  an  un- 
precedented economic  assistance  program  to  Europe  with  the  Truman 
Doctrine  and  the  Marshall  Plan.  By  insuring  economic  stability,  U.S. 
officials  hoped  to  limit  Soviet  encroachments.  Covert  operations  rep- 
resented another,  more  activist  departure  in  the  conduct  of  U.S.  peace- 
time foreign  policy.  Covert  action  was  an  option  that  was  something 
more  than  diplomacy  but  still  short  of  war.  As  such,  it  held  the 
promise  of  frustrating  Soviet  ambitions  without  provoking  open 
conflict. 

The  organizational  arrangements  for  the  conduct  of  covert  opera- 
tions reflected  both  the  concept  of  covert  action  as  defined  by  U.S.  offi- 
cials and  the  perception  of  the  CIA  as  an  institution.  Both  the 
activities  and  the  institution  were  regarded  as  extensions  of  the  State 
Department  and  the  military  services.  Covert  action  was  to  serve  a 
support  function  to  foreign  and  military  policy  preferences,  and  the 
CIA  was  to  provide  the  vehicle  for  the  execution  of  those  preferences. 

In  June  1948,  a  CIA  component,  the  Office  of  Special  Projects,  soon 
renamed  the  Office  of  Policy  Coordination  (OPC),  was  established 
for  the  execution  of  covert  operations.  The  specific  activities  included 
psychological  warfare,  political  warfare,  economic  warfare,  and  para- 
military activities.  OPC's  budget  and  personnel  were  appropriated 
within  CIA  allocations,  but  the  DCI  had  no  authority  in  determining 
OPC's  acti\'ities.  Responsibility  for  the  direction  of  OPC  rested  with 
the  Office's  director,  appointed  by  the  Secretary  of  State.  Policy  guid- 
ance— decisions  on  the  need  for  specific  activities — came  to  the  OPC 
director  from  State  and  Defense,  bypassing  the  DCI. 

In  recommending  the  development  of  a  covert  action  capability  in 
1948,  policymakers  intended  to  make  available  a  small  contingency 
force  with  appropriate  funding  that  could  mount  operations  on  a  lim- 
ited basis.  Senior  officials  did  not  plan  to  develop  large-scale  con- 
tinuing activities.  Instead,  they  hoped  to  establish  a  small  capability 
that  could  be  activated  when  and  where  the  need  occurred — at  their 
discretion. 

6.  The  Office  of  Policy  Coordination,  191^8-1952 

OPC  developed  into  a  far  different  organization  from  that  envi- 
sioned by  Forrestal,  Marshall,  and  Kennan.  By  1952,  when  it  merged 
with  the  Agency's  clandestine  collection  component,  the  Office  of  Spe- 
cial Operations,  OPC  had  innumerable  activities  worldwide,  and  it 
had  achieved  the  institutional  independence  that  was  unimaginable 
at  the  time  of  its  inception. 

The  outbreak  of  the  Korean  War  in  the  summer  of  1950  had  a  sig- 
nificant effect  on  OPC.  Following  the  North  Korean  invasion  of  South 
Korea,  the  State  Department  as  well  as  the  Joint  Chiefs  of  Staff  re- 
quested the  initiation  of  paramilitary  activities  in  Korea  and  China. 
OPC's  participation  in  the  war  effort  contributed  to  its  transforma- 
tion from  an  organization  that  was  to  provide  the  capability  for  a 
limited  number  of  ad  hoc  operations  to  an  organization  that  conducted 
continuing,  ongoing  activities  on  a  massive  scale.  In  concept,  man- 
power, budget,  and  scope  of  activities,  OPC  simply  skyrocketed.  The 
comparative  figures  for  1949  and  1952  are  staggering.  In  1949  OPC's 


107 

total  personnel  strength  was  302 ;  in  1952  it  was  2,812  plus  3,142  over- 
seas contract  personnel.  In  1949  OPC's  budget  figure  was  $4,700,000 ; 
in  1952  it  was  $82,000,000.  In  1949  OPC  had  personnel  assigned  to 
seven  overseas  stations;  in  1952  OPC  had  personnel  at  forty-seven 
stations.* 

Apart  from  the  impetus  provided  by  the  Korean  War  several  other 
factors  converged  to  alter  the  nature  and  scale  of  OPC's  activities. 
First,  policy  direction  took  the  form  of  condoning  and  fostering  ac- 
tivity without  providing  scrutiny  and  control.  Officials  throughout  the 
government  regarded  the  Soviet  Union  as  an  aggressive  force,  and 
OPC's  activities  were  initiated  and  justified  on  the  basis  of  this  shared 
perception.  The  series  of  NSC  directives  wliich  authorized  covert  op- 
erations laid  out  broad  objectives  and  stated  in  bold  terms  the  neces- 
sity for  meeting  the  Soviet  challenge  head  on.  After  the  first  1948 
directive  authorizing  covert  action,  subsequent  directives  in  1950  and 
1951  called  for  an  intensification  of  these  activities  without  establish- 
ing firm  guidelines  for  approval.  State  and  Defense  guidance  to  OPC 
quickly  became  very  general,  couched  in  terms  of  overall  goals  rather 
than  specific  activities.  This  allowed  OPC  maximum  latitude  for  the 
initiation  of  activities  or  "projects,"  the  OPC  term. 

Second,  OPC  operations  had  to  meet  the  very  different  policy  needs 
of  the  State  and  Defense  Departments.  The  State  Department  encour- 
aged political  action  and  propaganda  activities  to  support  its  diplo- 
matic objectives,  while  the  Defense  Department  requested  paramili- 
tary activities  to  support  the  Korean  War  effort  and  to  counter  Com- 
munist-associated guerrillas.  These  distinct  missions  required  OPC  to 
develop  and  maintain  different  capabilities,  including  manpower  and 
support  material. 

The  third  factor  contributing  to  OPC's  expansion  was  the  organi- 
zational arrangements  that  created  an  internal  demand  for  projects. 
To  correlate  the  requirements  of  State  and  Defense  with  its  operations, 
OPC  adopted  a  project  system  rather  than  a  programmed  financial 
system.  This  meant  that  OPC  activities  were  organized  around  proj- 
ects rather  than  general  programs  or  policy  objectives  and  that  OPC 
budgeted  in  terms  of  anticipated  numbers  of  projects.  The  project 
system  had  important  internal  effects.  An  individual  within  OPC 
judged  his  own  performance,  and  was  judged  by  others,  on  the  im- 
portance and  number  of  projects  he  initiated  and  managed.  The  result 
was  competition  among  individuals  and  among  the  OPC  divisions  to 
generate  the  maximum  number  of  projects.  Projects  remained  the 
fundamental  units  around  which  covert  activities  were  organized,  and 
two  generations  of  Agency  personnel  have  been  conditioned  by  this 
system. 

7.  OPC  Integration  and  the  OPC-OSO  Merger 

The  creation  of  OPC  and  its  ambiguous  relationship  to  the  Agency 
precipitated  two  major  administrative  problems :  the  DCI's  relation- 
ship to  OPC,  and  antagonism  between  OPC  and  the  Agency's  clandes- 
tine collection  component,  the  Office  of  Special  Operations.  DCI  Wal- 
ter Bedell  Smith  acted  to  rectify  both  problems. 


*  Congress  in  1949  enacted  legislation  exempting  the  DCI  from  the  necessity 
of  accounting  for  specific  disbursements. 


108 

As  OPC  continued  to  grow,  Smith's  predecessor,  Admiral  Hillen- 
koetter,  resented  the  fact  that  he  had  no  management  authority  over 
OPC,  although  its  budget  and  personnel  were  being  allocated  through 
the  CIA.  Hillenkoetter's  clashes  with  the  State  and  Defense  Depart- 
ments as  well  as  with  Frank  G.  Wisner,  the  Director  of  OPC,  were 
frequent.  Less  than  a  week  after  taking  office,  Smith  announced  that  as 
DCI  he  would  assume  administrative  control  of  OPC  and  that  State 
and  Defense  would  channel  their  policy  guidance  through  him  rather 
than  through  Wisner.  On  October  12,  1950,  the  representatives  of 
State,  Defense  and  the  Joint  Chiefs  of  Staff  formally  accepted  the 
change.  The  ease  with  which  the  shift  occurred  was  primarily  a  result 
of  Smith's  own  position  of  influence  with  the  Departments. 

OPC's  anomalous  position  in  the  Agency  revealed  the  difficulty  of 
maintaining  two  separate  organizations  for  the  execution  of  varying 
but  overlapping  clandestine  activities.  The  close  "tradecraft"  rela- 
tionship between  clandestine  collection  and  covert  action,  and  the 
frequent  necessity  for  one  to  support  the  other  was  totally  distorted 
with  the  separation  of  functions  in  OSO  and  OPC.  Organizational 
rivalry  rather  than  interchange  dominated  the  relationship  between 
the  two  components. 

On  the  operating  level  the  conflicts  were  vicious.  Each  component 
had  representatives  conducting  separate  operations  at  each  overseas 
station.  Given  the  related  missions  of  the  two,  OPC  and  OSO  person- 
nel were  often  competing  for  the  same  agents  and,  not  infrequently,  at- 
tempting to  wrest  agents  from  each  other.  In  1952  the  outright  hostility 
between  the  two  organizations  in  Bangkok  required  the  direct  interven- 
tion of  the  Assistant  Director  for  Special  Operations,  Lyman  Kirk- 
patrick.  There  an  important  local  official  was  closely  tied  to  OPC,  and 
OSO  was  trying  to  lure  him  into  its  employ. 

Between  1950  and  1952  Smith  took  several  interim  steps  to  encour- 
age coordination  between  the  two  components.  In  August  1952  OSO 
and  OPC  were  merged  into  the  Directorate  for  Plans  (DDP). 
The  lines  between  the  OSO  "collectors"  and  the  OPC  "operators" 
blurred  rapidly,  particularly  in  the  field,  where  individuals  were  called 
upon  to  perform  both  functions. 

The  merger  did  not  result  in  the  dominance  of  one  group  over 
another;  it  resulted  in  the  maximum  development  of  clandestine 
operations  over  clandestine  collection.  For  people  in  the  field,  rewards 
came  more  quickly  through  visible  operational  accomplishments  than 
through  the  silent,  long-term  development  of  agents  required  for  clan- 
destine collection.  In  the  words  of  one  former  high-ranking  DDP 
official,  "Collection  is  the  hardest  thing  of  all;  it's  much  easier  to 
plant  an  article  in  a  local  newspaper." 

To  consolidate  the  management  functions  required  for  the  burgeon- 
ing organization,  Smith  created  the  Directorate  for  Adminis- 
tration (DDA).  From  the  outset,  much  of  the  DDA's  effort  supported 
field  activities.  The  Directorate  was  responsible  for  personnel,  budget, 
security,  and  medical  services  Agency- wide.  However,  one  quarter  of 
DDA's  total  personnel  strength  was  assigned  to  logistical  support  for 
overseas  operations. 


109 

By  1953  the  Agency  had  achieved  the  basic  structure  and  scale  it 
retained  for  the  next  twenty  years.  The  Korean  War,  United  States 
foreign  policy  objectives,  and  the  Agency's  internal  organizational 
arrangements  had  combined  to  produce  an  enormous  impetus  for 
growth.  The  CIA  was  six  times  the  size  it  had  been  in  1947. 

Three  Directorates  had  been  established.  The  patterns  of  activity 
within  each  Directorate  and  the  Directorates'  relationships  to  one 
another  had  developed.  The  DDP  commanded  the  major  share  of  the 
Agency's  budget,  personnel,  and  resources;  in  1952  clandestine  col- 
lection and  covert  action  accounted  for  74  percent  of  the  Agency's 
total  budget;^  its  pereonnel  constituted  60  percent  of  the  CIA's  per- 
sonnel strength.  While  production  rather  than  coordination  dominated 
the  DDI,  operational  activities  rather  than  collection  dominated  the 
DDP.  The  DDI  and  the  DDP  emerged  at  different  times  out  of  dis- 
parate policy  needs.  They  were,  in  effect,  separate  organizations. 
These  fundamental  distinctions  and  emphases  were  reinforced  in  the 
next  decade. 

B.  The  Dulles  Era:  1953-1961 

Allen  W.  Dulles'  impact  on  the  Central  Intelligence  Agency  was 
perhaps  greater  than  that  of  any  other  single  individual.  The  source 
of  his  influence  extended  well  beyond  his  personal  qualities  and  in- 
clinations. The  composition  of  the  United  States  Government,  inter- 
national events,  and  senior  policymakers'  perception  of  the  role  the 
Agency  could  play  in  United  States  foreign  policy  converged  to  make 
Dulles'  position  and  that  of  the  Agency  unique  in  the  years  1953  to 
1961. 

The  election  of  1952  brought  Dwight  D,  Eisenhower  to  the  presi- 
dency. Eisenhower  had  been  elected  on  a  strident  anti-Communist  plat- 
form, advocating  an  aggressive  worldwide  stance  against  the  Soviet 
Union  to  replace  what  he  described  as  the  Truman  Administration's 
passive  policy  of  containment.  Eisenhower  cited  the  Communist  vic- 
tory in  China,  the  Soviet  occupation  of  Eastern  Europe,  and  the 
Korean  War  as  evidence  of  the  passivity  which  had  prevailed  in  the 
United  States  Government  following  World  War  II.  He  was  equally 
passionate  in  his  call  for  an  elimination  of  government  corruption  and 
for  removal  of  Communist  sympathizers  from  public  office. 

This  was  not  simply  election  rhetoric.  The  extent  to  which  the 
urgency  of  the  Communist  threat  had  become  a  shared  perception 
is  difficult  to  appreciate.  By  the  close  of  the  Korean  War,  a  broad 
consensus  had  developed  about  the  nature  of  Soviet  ambitions  and 
the  need  for  the  United  States  to  respond.  The  earlier  fear  of  United 
States  policymakers  that  the  Soviet  Union  would  provoke  World 
War  III  had  subsided.  Gradually,  the  Soviet  Union  was  perceived 
as  posing  a  worldwide  political  threat.  In  the  minds  of  government 
officials,  members  of  the  press,  and  the  informed  public,  the  Soviets 
would  try  to  achieve  their  purposes  by  the  penetration  and  subversion 
of  governments  all  over  the  world.  The  accepted  role  of  the  United 
States  was  to  prevent  that  expansion. 


^This  did  not  include  DDA  budgetary  allocations  in  support  of  DDP  opera- 
tions. 


no 

Washington  policymakers  regarded  the  Central  Intelligence  Agency 
as  a  primary  means  of  defense  against  Communism.  By  1953,  the 
Agency  was  an  established  element  of  government.  Its  contributions 
in  the  areas  of  political  action  and  paramilitary  warfare  were  recog- 
nized and  respected.  It  alone  could  perform  many  of  the  kinds  of 
activities  seemingly  required  to  meet  the  Soviet  threat.  For  senior 
officials,  covert  operations  had  become  a  vital  element  in  the  pursuit 
of  United  States  foreign  policy  objectives. 

At  this  time,  the  CIA  attracted  some  of  the  most  able  lawyers, 
academicians,  and  young,  committed  activists  in  the  country.  They 
brought  with  them  professional  associations  and  friendships  which 
extended  to  the  senior  levels  of  government.  The  fact  that  Agency 
employees  often  shared  similar  wartime  experiences,  comparable  social 
backgrounds,  and  then  complementary  positions  with  other  govern- 
ment officials,  contributed  significantly  to  the  legitimacy  of  and  con- 
fidence in  the  Agency  as  an  instrument  of  government.  Moreover, 
these  informal  ties  created  a  tacit  understanding  among  policymakers 
about  the  role  and  direction  of  the  Agency.  At  the  working  level, 
these  contacts  were  facilitated  by  the  Agency's  location  in  downtown 
Washington.  Housed  in  a  sprawling  set  of  buildings  in  the  center  of 
the  city.  Agency  personnel  could  easily  meet  and  talk  with  State 
and  Defense  officials  throughout  the  day.  The  CIA's  physical  presence 
in  the  city  gave  it  the  advantage  of  seeming  an  integral  part  of,  rather 
than  a  separate  element  of,  the  government. 

A  crucial  factor  in  securing  the  Agency's  place  within  the  govern- 
ment during  this  period  was  the  fact  that  the  Secretary  of  State,  John 
Foster  Dulles,  and  the  DCI  were  brothers.  Whatever  the  formal  rela- 
tionships among  the  State  Department,  the  NSC,  and  the  Agency, 
they  were  supereeded  by  the  personal  and  working  association  between 
the  brothers.  Most  importantly,  both  had  the  absolute  confidence  of 
President  Eisenhower.  In  the  day-to-day  formulation  of  policy,  these 
relationships  were  crucial  to  the  Executive's  support  for  the  Agency, 
and  more  specifically,  for  Allen  Dulles  pereonally  in  the  definition  of 
his  own  role  and  that  of  the  Agency. 


No  one  was  more  convinced  that  the  Aarency  could  make  a  special 
contribution  to  the  advancement  of  Ignited  States  foreign  policy  goals 
than  Allen  Dulles.  Dulles  came  to  the  post  of  DCI  in  February  1953 
with  an  extensive  background  in  foreign  affairs  and  foreign  espionage, 
dating  back  to  World  War  I.  By  the  time  of  his  appontment, 
his  view  of  the  CIA  had  been  firmly  established.  Dulles'  role 
as  DCI  was  rooted  in  his  wartime  experience  with  OSS.  His  interests 
and  expertise  lay  with  the  operational  aspects  of  intelligence,  and  his 
fascination  with  the  details  of  operations  persisted. 

Perhaps  the  most  important  effect  of  Dulles'  absorption  with  oper- 
ations was  tlie  impact  it  had  on  the  Agency's  relationship  to  the  intel- 
ligence "community" — the  intelligence  components  in  State  and  De- 
fense. As  DCI  Dulles  did  not  assert  his  position  or  that  of  the  Agency 
in  attempting  to  coordinate  departmental  intelligence  activities. 

This,  after  all,  had  been  a  major  purpose  for  the  Agency's  creation. 
Dulles'  failure  in  this  area  constituted  a  lost  opportunity.  By  the  mid- 


Ill 

die  of  the  decade  the  Agency  was  in  the  forefront  of  technological 
innovation  and  had  developed  a  strong  record  on  military  estimates. 
Conceivably,  Dulles  could  have  used  these  advances  as  bureaucratic 
leverage  in  exerting  some  control  over  the  community.  He  did  not. 
Much  of  the  reason  was  a  matter  of  personal  temperament.  Jolly, 
gregarious,  and  extroverted  in  the  extreme,  Dulles  disliked  and  avoided 
confrontations  at  every  level.  In  doing  so,  he  failed  to  provide  even 
minimal  direction  over  the  departmental  intelligence  components  at 
a  time  when  intelligence  capabilities  were  undergoing  dramatic 
changes. 

1.  The  Clandestine  Service  ^^ 

It  is  both  easy  to  exaggerate  and  difficult  to  appreciate  the  place 
which  the  Clandestine  Service  secured  in  the  CIA  during  the  Dulles 
administration  and,  to  a  large  extent,  retained  thereafter.  The  number 
and  extent  of  the  activities  undertaken  are  far  less  important  than  the 
impact  which  those  activities  had  on  the  Agency's  institutional  iden- 
tity— the  way  people  within  the  DDP,  the  DDI,  and  the  DDA  per- 
ceived the  Agency's  primary  mission,  and  the  way  policymakers  re- 
garded its  contribution  to  the  process  of  government. 

Covert  action  was  at  the  core  of  this  perception.  The  importance  of 
covert  action  to  the  internal  and  external  evaluation  of  the  Agency 
was  in  large  part  derived  from  the  fact  that  only  the  CIA  could  and 
did  perform  this  function.  Moreover,  in  the  international  environ- 
ment of  the  1950's  Agency  operations  were  regarded  as  an  essential 
contribution  to  the  attainment  of  United  States  foreign  policy  objec- 
tives. Although  by  1954  the  Soviet  threat  was  redefined  from  military 
to  political  terms,  the  intensity  of  the  conflict  did  not  diminish.  Politi- 
cal action,  sabotage,  support  to  democratic  governments,  counterin- 
telligence— all  this  the  Clandestine  Service  could  provide. 

The  Agency  also  benefited  from  what  were  regarded  as  its  opera- 
tional "successes"  in  this  period.  In  1953  and  1954  two  of  the  Agency's 
boldest,  most  spectacular  covert  operations  took  place — the  overthrow 
of  Premier  Mohammed  Mossadegh  in  Iran  and  the  coup  against 
President  Jacobo  Arbenz  Guzman  of  Guatemala.  Both  were  quick 
and  bloodless  operations  that  removed  two  allegedly  Communist-asso- 
ciated leaders  from  power  and  replaced  them  with  pro-Western  offi- 
cials. Out  of  these  early  achievements  both  the  Agency  and  Washington 
policymakers  acquired  a  sense  of  confidence  in  the  CIA's  capacity  for 
operational  success. 

The  DDP's  major  expansion  in  overseas  stations  and  in  the  estab- 
lishment of  an  infrastruture  for  clandestine  activities  had  taken  place 
between  1950  and  1952.  In  the  decade  of  the  1950's  the  existing  struc- 
ture made  possible  the  development  of  continuous  foreign  intelligence, 
counterintelligence,  political  action,  and  propaganda  activities. 

Policymakers'  perception  of  covert  action  as  the  CIA's  primary 
mission  was  an  accurate  reflection  of  the  Agency's  internal  dynamics. 
Between  1953  and  1962,  the  Clandestine  Service  occupied  a  preeminent 
position  in  the  CIA.  First,  it  had  the  consistent  attention  of  the  DCI. 


"'*  The  term  "Clandestine  Service"  is  used  synonymously  with  the  Deputy 
Directorate  for  Plans.  Although  Clandestine  Service  has  never  heen  an  official 
desip^nation,  it  is  common  usage  in  the  intelligence  community  and  appears  as 
such  in  the  Select  Committee's  hearings. 


112 

Second,  the  DDP  commanded  the  major  portion  of  resources  in  the 
Agency.  Between  1953  and  1961  clandestine  collection  and  covert  ac- 
tion absorbed  an  average  of  54  percent  of  the  Agency's  total  annual 
budget.*'  Although  this  represented  a  reduction  from  the  period  of  the 
Korean  War,  DDP  allocations  still  constituted  the  majority  of  the 
Agency's  expenditures.  Likewise,  from  1953  to  1961,  the  DDP  gained 
nearly  2,000  personnel.  On  its  formal  table  of  organization,  the  DDP 
registered  an  increase  of  only  1,000.  However,  increases  of  nearly  1,000 
in  the  logistics  and  communications  components  of  the  DDA  rep- 
resented growth  in  support  to  Clandestine  Service  operations. 

Within  the  Agency  the  DDP  was  a  Directorate  apart.  As  the  number 
of  covert  action  projects  increased,  elaborate  requirements  for  secrecy 
developed  around  operational  activities.  The  DDP's  self-imposed  secu- 
rity requirements  left  it  exempt  from  many  of  the  Agency's  procedures 
of  accountability.  Internally,  the  DDP  became  a  highlv  compart- 
mented  structure,  where  information  was  limited  to  small  gi'oups  of 
individuals  based  primarily  on  a  "need  to  know"  principle. 

The  norms  and  position  of  the  Clandestine  Service  had  important 
repercussions  on  the  execution  of  the  CIA's  intelligence  mission  in  the 
1953  to  1962  period.  Theoretically,  the  data  collected  by  the  DDP  field 
officers  should  have  served  as  a  major  source  for  DDI  analysis.  How- 
ever, strict  compartmentation  prevented  open  contact  between  DDP 
personnel  and  DDI  analysts.  Despite  efforts  in  the  1960's  to  break  down 
the  barriers  between  the  Directorates,  the  lack  of  real  interchange  and 
interdependence  persisted. 

In  sum,  the  DDP's  preeminent  position  during  the  period  was  a 
function  of  several  factors,  including  policymakers'  perception  of  the 
Agency  primarily  in  operational  terms,  the  proportion  of  resources 
which  the  Clandestine  Service  absorbed,  and  the  time  and  attention 
which  the  DCI  devoted  to  operations.  These  patterns  solidified  under 
Dulles  and  in  large  part  account  for  the  DDP's  continued  primacy 
within  the  Agency. 

2.  Intelligence  Production 

In  the  decade  of  the  1950's  the  CIA  was  the  major  contributor  to 
technological  advances  in  intelligence  collection.  At  the  same  time 
DDI  analysts  were  responsible  for  methodological  innovations  in 
strategic  assessments.  Despite  these  achievements,  CIA's  intelligence 
was  not  serving  the  purpose  for  which  the  organization  had  been 
created — informing  and  influencing  policymaking. 

By  1960  the  Agencv  had  achieved  significant  advances  in  its  strate- 
gic intelligence  capability.  The  development  of  overhead  reconnais- 
sance, beginning  with  the  U-2  aircraft  and  growing  in  scale  and 
sophistication  with  follow-on  systems,  generated  information  in 
greater  quantity  and  accuracy  than  had  ever  before  been  contem- 
plated. Basic  data  on  the  Soviet  Union  beyond  the  reach  of  human 
collection,  such  as  railroad  routes,  construction  sites,  and  industrial 
concentrations  became  readily  available. 

Analysts  in  the  Office  of  National  Estimates  began  reevaluating 
assumptions  regarding  Soviet  strategic  capabilities.  This  reevaluation 
resulted  in  reduced  estimates  of  Soviet  missile  deployments  at  a  time 
when  the  armed  services  and  members  of  Congress  were  publicly 

*  This  did  not  include  DDA  budgetary  allocations  in  support  of  DDP  operations. 


113 

proclaiming  a  "missile  gap"  between  the  United  States  and  the  Soviet 
Union. 

A  final  element  contributed  to  the  Agency's  estimative  capaJbility : 
material  supplied  by  Oleg  Penkovsky.  Well-placed  in  Soviet  military 
circles,  Penkovsky  turned  over  a  number  of  classified  documents  relat- 
ing t/O  Soviet  strategic  planning  and  capabilities.  These  three  factors — 
technological  breakthrough,  analytic  innovation,  and  the  single  most 
valuable  Soviet  agent  in  history — converged  to  make  the  Agency  the 
most  reliable  source  of  intelligence  on  Soviet  strategic  capabilities  in 
the  government. 

Yet  the  entrenched  position  of  the  military  services  and  the  Agency's 
own  limited  charter  in  the  area  of  military  analysis  made  it  difficult 
for  the  Agency  to  challenge  openly  the  intelligence  estimates  of  the 
services.  The  situation  was  exacerbated  by  Dulles'  own  disposition.  As 
DCI  he  did  not  associate  himself  in  the  first  instance  with  intelligence 
production  and  did  not  assume  an  advocacy  role  in  extending  the 
Agency's  claims  to  military  intelligence. 

Strategic  intelligence,  although  a  significant  portion  of  the  DDI's 
production  effort,  constituted  a  particular  problem.  A  broader  prob- 
lem involved  the  overall  impact  of  intelligence  on  policy.  The  CIA 
had  been  conceived  to  provide  high-quality  national  intelligence  esti- 
mates to  policymakers.  However,  the  communication  and  exchange 
necessary  for  analysts  to  calibrate,  anticipate  and  respond  to  policy- 
makers' needs  never  really  developed. 

The  size  of  the  Directorate  for  Intelligence  constituted  a  major  ob- 
stacle to  the  attainment  of  consistent  interchange  between  analysts  and 
their  clients.  In  1955  there  were  466  analysts  in  ORE,  217  in  OCI,  and 
207  in  OSI.  The  process  of  drafting,  reviewing  and  editing  intel- 
ligence publications  involved  large  numbers  of  individuals  each  of 
whom  felt  responsible  for  and  entitled  to  make  a  contribution  to  the 
final  product.  Yet  without  access  to  policymakers,  analysts  did  not 
have  an  ongoing  accurate  notion  of  how  the  form  and  substance  of  the 
intelligence  product  might  best  serve  the  needs  of  senior  officials.  The 
product  itself — as  defined  and  arbitrated  among  DDI  analysts — be- 
came the  end  rather  than  the  satisfaction  of  specific  policy  needs. 

The  establishment  of  the  Office  of  National  Estimates  was  an  at- 
tempt to  insure  direct  interaction  between  senior  level  officials  and  the 
Agency.  However,  by  the  mid-1950's  even  its  National  Intelligence 
Estimates  showed  signs  of  being  submerged  in  the  second-level  paper 
traffic  that  was  engulfing  the  intelligence  community.  Between  1955 
and  1956  a  senior  staff  member  in  ONE  surveyed  the  NIEs'  reader- 
ship by  contacting  executive  assistants  and  special  assistants  of  the 
President  and  cabinet  officers,  asking  if  the  NIEs  were  actually  placed 
on  their  superiors'  desks.  The  survey  revealed  that  senior  policymak- 
ers were  not  reading  the  NIEs.  Instead,  second  and  third-level  offi- 
cials used  the  estimates  for  background  information  in  briefing  senior 
officials.  The  failure  of  the  NIEs  to  serve  their  fundamental  purpose 
for  senior  officials  was  indicative  of  the  overall  failure  of  intelligence 
to  influence  policy, 

S.  The  Comirmnity  CoordirMtionProhlem 

Dulles'  neglect  of  the  community  management  or  coordination  as- 
pect of  his  role  as  DCI  was  apparent  to  all  who  knew  and  worked  with 


114 

him.  His  reluctance  to  assume  an  aggressive  role  in  dealing  with  the 
military  on  the  issue  of  military  estimates  was  closely  tied  to  his  lack 
of  initiative  in  community-related  matters.  Unlike  Bedell  Smith  before 
him  and  John  McCone  after  him,  Dulles  was  reluctant  to  take  on  the 
military. 

The  development  of  the  U-2  and  follow-on  systems  had  an  enormous 
impact  on  intelligence-collection  capabilities  and  on  the  Agency's  rela- 
tive standing  in  the  intelligence  community.  Specifically,  it  marked 
the  Agency's  emergence  as  the  intelligence  community's  leader  in  the 
area  of  overhead  reconnaissance. 

At  a  time  when  the  CIA  was  reaping  the  benefits  of  overhead  recon- 
naissance and  when  the  DDI's  estimates  on  Soviet  missiles  were  taking 
issue  with  the  services'  judgments,  Dulles  could  have  been  far  more 
aggressive  in  asserting  the  Agency's  position  in  the  intelligence  com- 
munity and  in  advancing  his  own  role  as  coordinator. 

As  the  community  became  larger  and  as  technical  systems  came  to 
require  very  large  budgetary  allocations,  the  institutional  obstacles 
to  interdepartmental  coordination  increased.  By  not  acting  on  the  op- 
portunity he  had,  Dulles  allowed  departmental  procedures,  specifical- 
ly those  in  the  military's  technical  collection  programs,  to  become  more 
entrenched  and  routinized,  making  later  attempts  at  coordination  more 
difficult. 

The  coordination  problem  did  not  go  unnoticed  during  Dulles' 
term,  and  there  were  several  attempts  within  Congress  and  the 
Executive  to  direct  Dulles'  attention  to  the  DCI's  community  respon- 
sibility. The  efforts  were  unsuccessful  both  because  of  Dulles'  personal 
disposition  and  because  of  the  inherent  weakness  of  the  mechanisms 
established  to  strengthen  the  DCI's  position  in  the  community. 

In  January  1956,  President  Eisenhower  created  the  President's 
Board  of  Consultants  on  Foreign  Intelligence  Activities  (PBCFIA). 
In  May,  1961  it  was  renamed  the  President's  Foreign  Intelligence 
Advisory  Board  (PFIAB).  Composed  of  retired  senior  government 
officials  and  members  of  the  professions,  the  Board  was  to  provide 
the  President  with  advice  on  intelligence  matters.  As  a  deliberative 
body  it  had  no  authority  over  either  the  DCI  or  the  community.  Thus, 
the  Board  had  little  impact  on  the  administration  of  the  CIA  or  on 
the  other  intelligence  services.  The  Board  did  identify  the  imbalance 
in  Dulles'  role  as  DCI,  and  in  December  1956  and  again  in  December 
1958  it  recommended  the  appointment  of  a  chief  of  staff  for  the  DCI  to 
handle  the  Agency's  internal  administration.  In  1960,  the  PBCFIA 
suggested  the  possibility  of  separating  the  DCI  from  the  Agency 
to  serve  as  the  President's  intelligence  advisor  and  to  coordinate 
community  activities.  Nothing  resulted  from  these  recommendations. 

In  1957,  the  Board  recommended  the  merger  of  the  United  States 
Communications  Intelligence  Board  with  the  Intelligence  Advisory 
Committee.^  This  proposal  was  intended  to  strengthen  the  DCI's 

"^  The  USCIB  was  established  in  1946  to  advise  and  make  recommendations 
on  communications  intelligence  to  the  Secretary  of  Defense.  USOIB's  member- 
ship included  the  Secretaries  of  State,  Defense,  the  Director  of  the  FBI,  and 
representatives  of  the  Army,  Navy,  Air  Force,  and  CIA.  USCIB  votes  were 
weighted.  Representatives  of  State,  Defense,  the  FBI.  and  CIA  each  had  two 
votes :  other  members  had  one.  Although  the  DCI  sat  on  the  Committee,  he  had 
no  vote. 


115 

authority,  and  it  resulted  in  the  creation  in  the  following  year  of  the 
United  States  Intelligence  Board  (USIB)  with  the  DCI  as  chairman. 
Like  the  lAC,  howev^er,  USIB  was  little  more  than  a  super-structure. 
It  had  no  budgetary  authority;  nor  did  it  provide  the  DCI  with  any 
direct  control  over  the  components  of  the  intelligence  community. 
The  separate  elements  of  the  community  continued  to  function  under 
the  impetus  of  their  own  internal  drives  and  mission  definitions. 
Essentially,  the  problem  that  existed  at  the  time  of  the  creation  of 
the  CIG  remained. 


From  1953  to  1961  a  single  Presidential  administration  and  con- 
sistent American  policy  objectives  which  had  wide  public  and  govern- 
mental support  contributed  to  a  period  of  stability  in  the  Agency's 
history.  The  internal  patterns  that  had  begun  to  emerge  at  the  close 
of  the  Korean  War  solidified.  The  problems  remained  much  the  same. 

The  inherent  institutional  obstacles  to  management  of  the  com- 
munity's intelligence  activities  combined  with  Dulles'  failure  to  assert 
the  Agency's  and  the  DCI's  coordination  roles  allowed  the  perpetua- 
tion of  a  fragTiiented  goveniment-wide  intelligence  effort.  The  CIA's 
own  intelligence  production,  though  distinguished  by  advances  in 
technical  collection  and  in  analysis,  had  not  achieved  the  consistent 
policy  support  role  that  the  Agency's  creation  had  intended  to  provide. 

Dulles'  marked  orientation  toward  clandestine  activities,  his  broth- 
er's position  as  Secretary  of  State,  and  cold  war  tensions  combined  to 
maximize  the  Agency's  operational  capability.  In  tenns  of  policymak- 
ers' reliance  on  the  CIA,  allocation  of  resources,  and  the  attention  of 
the  Agency's  leadership,  clandestine  activities  had  overtaken  intelli- 
gence analysis  as  the  CIA's  primary  mission. 

C.  Change  and  Rotjtinizatiox  :  1961-1970 

In  1961  cold  war  attitudes  continued  to  dominate  the  foreign  policy 
assumptions  of  United  States  policymakers.  In  the  early  part  of  the 
decade  American  confidence  and  conviction  were  manifested  in  an  ex- 
pansive foreign  policy  that  included  the  abortive  Bay  of  Pigs  landing, 
a  dramatic  confrontation  with  the  Soviet  Union  over  the  installation 
of  Soviet  missiles  in  Cuba,  increased  economic  assistance  to  underde- 
veloped countries  in  Latin  America  and  Africa,  and  rapidly  escalating 
military  activities  in  Southeast  Asia. 

Although  the  American  presence  in  Vietnam  symbolized  LT.S.  ad- 
herence to  the  strictures  of  the  Cold  War,  perceptions  of  the  Soviet 
Union  began  to  change  by  the  middle  of  the  decade.  The  concept  of  an 
international  monolith  broke  down  as  differences  between  the  U.S.S.R. 
and  China  emerged.  Moreover,  the  strategic  arms  competition  assumed 
increased  importance  in  relations  between  the  two  coimtries. 

The  CIA  was  drawn  into  each  major  development  in  United  States 
policy.  As  in  the  previous  decade,  operations  dominated  policymakers' 
perceptions  of  the  Agency's  role.  The  United  States'  intei-ventionist 
policy  fostered  the  CIA's  utilization  of  its  existing  capabilities  as  well 
as  the  development  of  paramilitary  capabilities  in  support  of  Ameri- 
can count erinsurgency  and  military  programs.  At  the  same  time  the 
Agency's  organizational  arrangements  continued  to  create  an  inde- 
pendent dynamic  for  operations. 


116 

The  most  significant  development  for  the  Agency  in  this  period 
was  the  impact  of  technological  capabilities  on  intelligence  produc- 
tion. These  advances  resulted  in  internal  changes  and  forced  increased 
attention  to  coordination  of  the  intelligence  community.  The  costs, 
quality  of  intelligence  and  competition  for  deployment  generated  by 
technical  collection  systems  necessitated  a  working  relationship  among 
the  departmental  intelligence  components  to  replace  the  undirected 
evolution  that  had  marked  the  previous  decade.  Despite  the  Agency's 
internal  adjustments  and  attempts  to  effect  better  management  in 
the  community,  the  CIA's  fundamental  srtucture,  personnel,  and  in- 
centives remained  rooted  in  the  early  1950's. 

1.  The  Directors  of  Central  Intelligence^  1961-1970 

Jolin  A.  McCone  came  to  the  Central  Intelligence  Agency  as  an 
outsider  in  November  1961.  His  background  had  been  in  private  in- 
dustry, where  he  had  distinguished  himself  as  a  corporate  manager.  He 
also  held  several  government  posts,  including  Under  Secretary  of  the 
Air  Force  and  Chairman  of  the  Atomic  Energy  Commission.  McCone 
brought  a  quick,  sharp  intellect  to  his  job  as  DCI,  and  his  contribution 
lay  in  attempting  to  assert  his  role  and  that  of  the  Agency  in  coor- 
dinating intelligence  activities  among  the  Departments.  Much  of  his 
strength  in  the  intelligence  community  derived  from  the  fact  that 
he  was  known  to  have  ready  access  to  President  Kennedy.  McCone 
resigned  from  the  Agency  in  April  1965,  precisely  because  Lyndon 
Johnson  had  not  accorded  him  similar  stature. 

Admiral  William  F.  Raborn  served  as  DCI  for  only  a  year.  He 
left  in  June  1966,  and  his  impact  on  the  Agency  was  minimal. 

Richard  M.  Helms  came  to  the  position  of  DCI  after  twenty  years 
in  the  Clandestine  Service.  Just  as  Allen  Dulles  had  identified  him- 
self with  the  intelligence  profession.  Helms  identified  himself  with 
the  Agency  as  an  institution.  Having  served  in  a  succession  of  senior 
positions,  Helms  was  a  first-generation  product  of  the  Agency,  and 
he  commanded  the  personal  and  professional  respect  of  his  contem- 
poraries. Helms'  orientation  remained  on  the  operations  side,  and 
he  did  not  actively  pursue  the  DCI's  role  as  a  coordinator  of  intelli- 
gence activities  in  the  community. 

2.  The  Effort  at  Management  Reform 

The  Bay  of  Pigs  fiasco  had  a  major  impact  on  President  Kennedy's 
thinking  about  the  intelligence  community.  He  felt  he  had  been 
poorly  served  by  the  experts  and  sought  to  establish  procedures  that 
would  better  insure  his  own  acquisition  of  intelligence.  In  short,  Ken- 
nedy defined  a  need  for  a  senior  intelligence  officer  and  in  so  doing  as- 
sured John  McCone  an  influential  position  in  policymaking.  Ken- 
nedy's definition  of  the  DCI's  position  emphasized  two  roles :  coordi- 
nator for  the  community,  and  principal  intelligence  adviser  to  the 
President.  At  the  same  time,  Kennedy  directed  McCone  to  delegate 
the  internal  management  of  the  Agency  to  a  deputy  director.  Although 
McCone  agreed  with  Kennedy's  concept  of  the  DCI's  job  and  vigor- 
ously pursued  the  objectives,  the  results  were  uneven. 

To  carry  out  the  management  function  in  the  Agency,  McCone 
created  a  senior  staff.  The  principal  officer  was  the  Executive  Director- 
Comptroller,  who  was  to  assume  responsibility  for  day-to-day  ad- 


117 

ministraiton.^  The  arrangement  did  not  free  the  DCI  from  continuing 
involvement  in  Agency-related  matters,  particularly  those  concerning 
the  Clandestine  Service.  The  nature  of  clandestine  operations,  the  fact 
that  they  involved  and  continue  to  involve  people  in  sensitive,  com- 
plicated situations,  demanded  that  the  Agency's  senior  officer  assume 
responsibility  for  decisions.  A  former  member  of  McCone's  staff  esti- 
mates that  despite  the  DCI's  community  orientation,  he  spent  90  per- 
cent of  his  total  time  on  issues  related  to  clandestine  operations. 

The  establishment  of  the  office  of  National  Intelligence  Programs 
Evaluation  (NIPE)  in  1963  was  the  first  major  effort  by  a  DCI  to 
insure  consistent  contact  and  coordination  with  the  community.  Yet, 
from  the  outset  McCone  accepted  the  limitations  on  his  authority; 
although  Secretary  of  Defense  Robert  McNamara  agreed  to  provide 
him  with  access  to  the  Defense  Department  budget  (which  still  consti- 
tutes 80  percent  of  the  intelligence  conmiunity's  overall  budget) ,  Mc- 
Cone could  not  direct  or  control  the  intelligence  components  of  the 
other  departments.  The  NIPE  staff  directed  most  of  its  attention  to 
sorting  out  intelligence  requirements  through  USIB  and  attempting  to 
develop  a  national  inventory  for  the  community,  including  budget,  per- 
sonnel and  materials.  Remarkably,  this  had  never  before  been  done. 

The  most  pressing  problem  for  the  community  was  the  adjustment  to 
the  impact  of  technical  collection  capabilities.  The  large  budgetary 
resources  involved,  and  the  value  of  the  data  generated  by  overhead 
reconnaissance  systems  precipitated  a  major  bureaucratic  battle  over 
their  administration  and  control.  From  1963  to  1965,  much  of  McCone's 
and  the  senior  NIPE  staff  officer's  community  efforts  were  directed 
toward  working  out  an  agreement  with  the  Air  Force  on  development, 
production,  and  deployment  of  overhead  reconnaissance  systems. 

In  1961  the  Agency  and  the  Air  Force  had  established  a  working 
relationship  for  overhead  reconnaissance  systems  through  a  central  ad- 
ministrative office,  whose  director  reported  to  the  Secretary  of  Defense 
but  accepted  intelligence  requirements  through  USIB.  By  informal 
agreement,  the  Air  Force  provided  launchers,  bases,  and  recovery  ca- 
pability for  reconnaissance  systems,  while  the  Agency  was  responsible 
for  research,  development,  contracting,  and  security.  Essentially,  the 
agreement  allowed  the  Agency  to  decide  which  systems  would  be  de- 
ployed, and  the  Air  Force  challenged  the  CIA's  jurisdiction. 

A  primary  mission  was  at  stake  in  these  negotiations,  and  the 
struggle  was  fierce  on  both  sides.  Control  by  one  agency  or  another  did 
not  involve  only  budgets  and  manpower.  Since  the  Air  Force  and  CIA 
missions  were  very  different,  a  decision  would  affect  the  nature  of  the 
reconnaissance  program  itself — tactical  or  national  intelligence  pri- 
orities, the  frequency  and  location  of  overflights,  and  the  use  of  data. 

The  agreement  that  emerged  in  1965  attempted  to  balance  the  inter- 
ests of  both  the  Air  Force  and  the  CIA.  A  three-person  Executive 
Committee  (EXCOM)  for  the  administration  of  overhead  reconnais- 
sance was  eef  ablished.  Its  members  included  the  DCI,  an  Assistant  Sec- 
retary of  Defense,  and  the  President's  Scientific  Advisor.  The  EX 
COM  reported  to  the  Secretary  of  Defense,  who  was  a&signed  primai-y 
administrative  authority  for  overhead  reconnaissance  systems.  The 

'  Other  chaneres  included  placing  the  General  Counsel's  oflBce,  the  Audit  Staff, 
and  the  OflSce  of  Budget,  Program  Analysis  and  Manpower  directly  under  the  DCI. 


118 

arrano;ement  recooriized  the  DCI's  authority  avs  head  of  the  commu- 
nity to  establish  collection  requirements  in  consultation  with  USIB; 
it  also  gave  him  responsibility  for  processing  and  utilizing  data  gen- 
erated by  overhead  reconnaissance.  In  the  event  that  he  did  not  agree 
with  a  decision  made  by  the  Secretary  of  Defense,  the  DCI  was  given 
the  right  to  appeal  to  the  President. 

The  agreement  represented  a  compromise  between  Air  Force  and 
CIA  claims  'and  provided  substantive  recognition  of  the  DCI's  na- 
tional intelligence  responsibilitv.  As  a  structure  for  decisionmaking, 
it  has  worked  well.  However,  it  has  not  rectified  the  inherent  competi- 
tion over  technical  collection  systems  that  has  come  to  motivate  the 
intelligence  process.  The  development  of  these  systems  has  created 
intense  rivalry,  principally  between  the  Air  Force  and  the  Agency, 
over  program  deployments.  With  so  much  money  and  manpower  at 
stake  with  each  new  system,  each  organization  is  eager  to  gain  the 
benefits  of  successful  contracting.  As  'a  result,  the  accepted  solution 
to  problems  with  the  intelligence  product  has  come  to  be  more  collec- 
tion rather  than  better  analysis. 

After  1965  efforts  to  impose  some  direction  on  the  community  did 
not  receive  consistent  attention  from  DCIs  Raborn  and  Helms.  The 
DCIs'  priorities,  coupled  with  the  inherent  bureaucratic  obstacles  and 
the  burden  of  Vietnam,  relegated  the  problem  of  coordination  to  a 
low  priority. 

3.  The  Intelligence  Function 

Internally,  the  Agency  was  also  'adjusting  to  the  impact  of  techni- 
cal and  scientific  advances.  In  1963,  the  Directorate  for  Science 
and  Technology  (DDS&T)  was  created.  Previously,  scientific  and  tech- 
nical intelligence  production  had  been  scattered  among  the  other  three 
directorates.  The  process  of  organizing  an  independent  directorate 
meant  wresting  manpower  and  resources  from  the  existing  components. 
Predictably,  the  resistance  was  considerable,  and  a  year  and  a  half 
passed  between  the  first  attempts  at  creating  the  Directorate  and  its 
actual  establishment. 

The  new  component  included  the  Office  of  Scientific  Intelligence 
and  the  office  of  FLINT  (electronic  intercepts)  from  DDI,  the  Data 
Processing  Staff  from  DDA,  the  Development  Projects  Division  (re- 
sponsible for  overhead  reconnaissance)  from  the  DDP,  and  a  newly 
created  Office  of  Research  and  Development.  Later  in  1963,  the  For- 
eign Missile  and  Space  Analysis  Center  was  added.  The  Directorate's 
specific  functions  included,  and  continue  to  include,  research,  devel- 
opment, operation,  data  reduction,  analysis,  and  contributions  to  Na- 
tional Intelligence  Estimates. 

The  Directorate  was  organized  on  the  premise  that  close  coopera- 
tion should  exist  between  research  and  application  on  the  one  hand, 
and  technical  collection  and  analysis  on  the  other.  This  close  coordina- 
tion along  with  the  staffing  and  career  patterns  in  the  Directorate 
have  contributed  to  the  continuing  vitality  and  quality  of  the 
DDS&T's  work. 

The  DDP  began  and  remained  a  closed,  self-contained  component ; 
the  DDI  evolved  into  a  closed,  self-contained  component.  However, 
the  DDS&T  was  created  with  the  assumption  that  it  would  continue 
to  rely  on  expertise  and  advice  from  outside  the  Agency.  A  number  of 


119 

arrangements  insured  constant  interchanges  between  the  Directorate 
and  the  scientific  and  industrial  communities.  First,  since  all  research 
and  development  for  technical  systems  was  done  through  contracting, 
the  DDS&T  could  draw  on  and  benefit  from  the  most  advanced  tech- 
nical systems  nationwide.  Second,  to  attract  high-quality  professionals 
from  the  industiial  and  scientific  communities,  the  Directorate  estab- 
lished a  competitive  salary  scale.  The  result  has  been  personnel  mo- 
bility between  the  DDS&T  and  private  industry.  It  has  not  been 
unusual  for  individuals  to  leave  private  industi-y,  assume  positions 
with  DDS&T  for  several  years,  then  return  to  private  industry.  This 
pattern  has  provided  the  Directorate  with  a  constant  infusion  and 
renewal  of  talent.  Finally,  the  Directorate  established  the  practice  of 
regularly  employing  advisory  groups  as  well  as  fostering  DDS&T 
staff  participation  in  conferences  and  seminars  sponsored  by  profes- 
sional associations. 

The  Agency's  intelligence  capabilities  expanded  in  another  direc- 
tion. Although  in  the  1953-1961  period,  the  Agency  had  made  some 
contributions  to  military  intelligence,  it  had  not  openly  challenged  the 
Defense  Department's  prerogative  in  this  area.  In  the  early  1960's  that 
opportunity  came.  By  1962,  Secretary  of  Defense  Robert  McNamara's 
dissatisfaction  with  the  quality  of  military  estimates  led  him  to  begin 
tapping  the  Agency's  analytic  capabilities.  Specifically,  McNamara 
requested  special  estimates  from  the  Agency  and  included  Agency 
personnel  in  community-wide  exercises  in  long-term  Soviet  force  pro- 
jections. McNamara's  initiatives  provided  the  CIA  with  leverage 
against  the  military  services'  dominance  in  strategic  intelligence.  The 
Secretary's  actions,  together  with  McCone's  insistence  on  the  DCI's 
need  for  independent  judgments  on  military  matters,  resulted  in  the 
Agency's  expanded  analytic  effort  in  strategic  intelligence. 

In  1962,  the  Office  of  Current  Intelligence  established  a  military 
intelligence  division,  and  five  years  later  the  militaiy  intelligence  units 
of  OCI  and  ORR  were  combined  into  a  separate  office,  the  Office  of 
Strategic  Research  (OSR). 

During  this  period  economic  intelligence  grew  in  importance.  In 
the  decade  of  the  1950's  economic  research  had  concentrated  on  anal- 
ysis related  to  the  Soviet  Union  and  its  "satellites."  With  the  emer- 
gence of  independent  African  nations  in  the  early  1960's,  and  the 
view  that  the  U.S.S.R.  would  engage  in  political  and  economic  pene^ 
tration  of  the  fledgling  governments,  demands  for  information  on  the 
economies  of  these  countries  developed.  Likewise,  the  growing  eco- 
nomic strength  of  Japan  and  the  countries  of  Western  Europe  pro- 
duced a  related  decline  in  the  U.S.  competitive  posture  and  reflected 
the  growing  inadequacy  of  the  dollar-dominated  international  mone- 
tary system.  Economic  analysts  found  themselves  called  upon  for 
detailed  research  on  these  countries  as  trading  partners  and  rivals 
of  the  United  States.  In  1967  an  independent  Office  of  Economic  Re- 
search (OER)  succeeded  ORR. 

.^.  The  Paramilitary  Surge 

The  Clandestine  Service  continued  to  dominate  the  Agency's  activ- 
ities during  this  period.  In  budget,  manpower,  and  degree  of  DCI 
attention  accorded  the  DDP,  clnndestine  operations  remained  the 
CIA's  most  consuming  mission.  The  policies  and  operational  prefer- 


120 

ences  of  the  Executive  branch  dictated  the  Agency's  emphasis  in 
clandestine  activities. 

Evidence  of  Communist  guerrilla  activities  in  Southeast  Asia  and 
Africa  convinced  Kennedy  and  his  closest  advisers  of  the  need  for 
the  United  States  to  develop  an  unconventional  warfare  capability. 
"Counterinsurgency,"  as  the  U.  S.  effort  was  designated,  aimed  at 
preventing  communist-supported  military  victories  without  precipi- 
tating a  major  Soviet-American  military  confrontation. 

As  part  of  this  effort,  the  Agency,  under  the  direction  of  the  Ken- 
nedy Administration,  initiated  paramilitary  operations  in  Cuba,  Laos, 
and  Vietnam.  Following  the  Bay  of  Pigs,  attempts  to  undermine  the 
government  of  Cuban  Premier  Fidel  Castro  continued  with  Operation 
MONGOOSE.  Conducted  between  October  1961  and  October  1962, 
MONGOOSE  consisted  of  paramilitary,  sabotage,  and  political 
propaganda  activities.  The  Agency's  large-scale  involvement  in  South- 
east Asia  began  in  1962  with  programs  in  Laos  and  South  Vietnam. 
In  Laos,  the  Agency  implemented  air  supply  and  paramilitary  train- 
ing programs,  which  gradually  developed  into  full-scale  management 
of  a  ground  war.  Between  1962  and  1965,  the  Agency  worked  with  the 
South  Vietnamese  government  to  organize  police  forces  and  para- 
military units. 

In  the  remainder  of  the  decade,  Vietnam  dominated  the  CIA  just 
as  it  did  other  government  agencies.  In  both  the  DDP  and  the  DDI, 
the  CIA's  resources  were  directed  toward  supporting  and  evaluating 
the  U.S.  effort  in  Vietnam.  For  the  Agency  and  the  DCI,  it  was  a 
contradictory  position,  one  which  left  the  institution  and  the  man 
vulnerable  to  the  pressures  of  conflicting  purposes. 

On  the  one  hand,  the  DDP  was  supportins;  a  major  paramilitary 
operation,  which,  at  its  peak  in  1970,  involved  700  people,  600  of  whom 
were  stationed  in  Vietnam,  the  rest  at  headquarters.^  Stated  in  other 
terms,  12  percent  of  the  DDP's  manpower  was  devoted  to  Vietnam. 
Clearly,  the  Agency's  stake  in  the  operational  side  of  the  war  was 
significant. 

At  the  same  time,  the  analysts  were  also  drawn  into  the  war.  After 
the  initiation  of  the  bombing  campaign  against  North  Vietnam  in 
1965,  the  Agency  began  receiving  requests  for  assessments  of  the  cam- 
paign's impact.  By  1966,  both  the  Office  of  "Research  and  Reports  and 
the  Office  of  Current  Intelligence  had  established  special  staffs  to  deal 
with  Vietnam.  In  addition,  the  Special  Assistant  for  Vietnam  Affairs 
(SAVA)  staff  was  created  under  the  direction  of  the  DCI.  The  total 
number  of  DDI  analysts  involved  was  69. 

While  the  DDP  effort  was  increasinq-  in  proportion  to  the  American 
military^  buildup,  DDI  estimates  painted  a  pessimistic  view  of  the 
likelihood  of  U.S.  success  with  successive  escalations  in  the  ground 
and  air  wars.^°  At  no  time  was  the  institutional  dichotomy  between  the 
opprational  and  analvtical  components  more  stark. 

The  Agency's  involvement  in  Southeast  Asia  had  long-term  effects 
on  the  institution.  In  particular,  it  determined  the  second-generation 


*Bv  19f>5,  the  demands  for  personnpl  were  so  great  that  each  DDP  component 
was  levied  on  a  quota  basis  to  contribute  personnel. 

^^  There  were  exceptions  to  this.  The  SAVA  group  produced  some  positive  esti- 
mates of  the  bombing. 


121 

leadership  group  within  the  Agency.  By  1970,  the  first  generation  of 
Agency  careerists  was  beginning  to  reach  retirement  age  and  vacancies 
were  opening  in  senior-level  positions.  In  poth  the  DDP  and  the  DDI, 
many  of  those  positions  were  filled  by  individuals  who  had  distin- 
guished themselves  in  Southeast  Asia-related  activities.  In  the  Clande- 
stine Service,  men  who  spent  considerable  time  in  the  Far  East  have 
gone  on  to  become  a  former  DCI,  the  present  Deputy  Director  for 
Operations,^ ^  the  present  Chief  of  the  Western  Hemisphere  Division, 
the  Chief  of  the  Counterintelligence  Staif,  and  the  present  Deputy 
Chief  of  the  Soviet/East  European  Division.  On  the  DDI  side,  the 
present  Assistant  Deputy  Director  for  Intelligence  and  the  Chief  Na- 
tional Intelligence  Officer  ^^  were  all  involved  in  Vietnam  assessments 
at  the  height  of  the  war.  Clearly,  the  rewards  were  considerable  for 
participation  in  a  major  operation. 


The  decade  of  the  1960's  brought  increased  attention  to  the  problem 
of  coordinating  intelligence  activities  in  the  community  but  illustrated 
the  complex  difficulties  involved  in  effective  management.  Depart- 
mental claims,  the  orientation  of  the  DCI,  the  role  accorded  him  by  the 
President,  and  the  demands  of  clandestine  operations  all  affected  the 
execution  of  the  coordination  role.  Although  policymakers  were  incon- 
sisitent  in  their  utilization  of  the  Agency's  intelligence  analysis  capa- 
bility, all  continued  to  rely  heavily  on  the  CIA's  operational  capability 
in  support  of  their  policies.  That  fact  established  tlie  Agency's  own 
priorities  and  reinforced  the  existing  internal  incentives.  Despite  the 
Agency's  growing  sophistication  and  investment  in  technological 
systems,  clandestine  activities  continued  to  constitute  the  major  share 
of  the  Agency's  budget  and  pei-sonnel.  Between  1962  and  1970  the  DDP 
budget  averaged  52  percent  of  the  Agency's  total  amiual  budget.^^ 
Likewise,  in  the  same  period,  55  percent  of  full-time  Agency  personnel 
were  assigned  to  DDP  activities.^*  Essentially,  the  pattern  of  acti\'ity 
that  had  'begun  to  emerge  in  the  early  1950's  and  that  became  finiily 
established  under  Dulles  continued. 

D.  The  Recent  Past:  1971-1975 

The  years  1971  to  1975  were  a  period  of  transition  and  abrupt  change 
for  the  CIA.  The  scale  of  covert  operations  declined,  and  in  the  Execu- 
tive branch  and  at  the  senior  level  of  the  Agency  growing  concern 
developed  over  the  quality  of  the  intelligence  product  and  the  manage- 
ment of  the  intelligence  community's  resources.  However,  external 
pressures  overshadowed  initial  attempts  at  reform. 


"  In  1973  DCI  James  Schlesinger  changed  the  name  of  the  Clandestine  Service 
from  the  Directorate  for  Plans  to  the  Directorate  for  Operations  (DDO). 

"  See  page  123  of  this  section  for  discussion  of  National  Intelligence  Officers. 

^'  This  does  not  include  the  proportion  of  the  DDA  budget  that  supported  DDP 
activities. 

"  This  figure  includes  those  individuals  in  the  communications  and  logistics 
components  of  the  DDA,  whose  activities  vrere  in  direct  support  of  the  DDP 
mission. 


9-983  O  -  76  -  9 


122 

By  the  start  of  the  decade  broad  changes  had  evolved  in  American 
foreign  policy.  Dissension  over  Vietnam,  the  Congress'  more  assertive 
role  in  foreign  policy,  and  shifts  in  the  international  power  structure 
had  eroded  the  assumptions  on  which  U.S.  foreign  policy  had  been 
based.  The  consensus  that  had  existed  among  the  press,  the  informed 
public,  the  Congress,  and  the  Executive  branch  and  tliat  had  both  sup- 
ported and  protected  the  CIA  broke  down.  As  conflicting  policy  pref- 
erences emerged  and  as  misconduct  in  the  Executive  branch  was 
revealed,  the  CIA,  once  exempt  from  public  examination,  became  sub- 
ject to  close  scrutiny. 

/.  The  Directors  of  Central  InteJligence^  1973-1975 

James  E.  Schlesii\<rer's  tenure  as  DCI  from  February  to  July  1973 
was  brief  but  significant.  An  economist  by  training  and  long  an  ob- 
server of  the  intelligence  community  through  his  extensive  experience 
in  national  security  affairs,  Schlesinger  came  to  the  CIA  with  definite 
ideas  on  restructuring  the  management  of  the  community  and  on  im- 
proving the  quality  of  intelligence.  During  his  six  month  term  he  em- 
barked on  changes  that  promised  to  alter  the  DCI's  and  the  Agency's 
existing  priorities. 

William  E.  Colby  succeeded  Schlesinger.  An  attorney,  OSS  veteran, 
and  career  DDP  officer,  Colby's  background  made  him  seem  of  the 
traditional  operations  school  in  the  A.<rency.  His  overseas  assi.""nments 
included  positions  in  Rome,  Stockholm,  and  Saigon,  where  he  was 
Chief  of  Station.  Yet  Colby  brought  an  Agency-wide  and  community 
orientation  to  his  term  as  DCI  that  was  uncommon  for  DDP  careerists. 
Soon  after  his  appointment  the  Agency  became  the  focus  of  public  and 
Congressional  inquiries,  and  most  of  Colby's  time  was  absorbed  in  re- 
sponding to  these  developments. 

2.  E-fforts  at  Change 

Foreign  affairs  were  a  continuing  priority  in  the  Nixon  Administra- 
tion. Until  1971,  Vietnam  absorbed  most  of  the  time  and  attention  of 
the  President  and  his  Assistant  for  National  Securitv  Affairs.  Henry 
Kissinger.  After  1971,  both  tunned  to  a  redefinition  of  U.S.  foreign  pol- 
icy. Sharing  a  global  view  of  U.S.  ]:)olicv,  the  two  men  sought  to  re- 
structure relationships  with  the  Soviet  Union  and  with  the  People's 
Republic  of  China.  It  was  Kissinger  rather  than  Richard  Helms  who 
served  as  President  Nixon's  intelligence  officer.  Kissinger  provided 
Nixon  with  daily  briefings  and  relied  on  the  staff  of  the  National  Se- 
curity Council  for  intelligence  analysis. 

Both  men's  preference  for  working  with  (and  often  independently 
of)  small,  tightly  managed  staffs  is  well  known.  However,  both  were 
genuinely  interested  in  obtainins:  more  and  better  quality  intelligence 
from  the  CIA.  In  December  1970,  Nixon  requested  a  study  of  the  in- 
telligence community.  Executed  by  James  Schlesinger,  then  Assistant 
Director  of  the  Bureau  of  the  Budget,  the  study  resulted  in  the  Presi- 
dential directive  of  November  5,  1971,  assigning  the  DCI  responsibil- 
ity for  review  of  the  intelligence  community  budget.  The  intention  was 
that  the  DCI  would  advise  the  President  on  community-wide  budget- 
ary allocations  by  serving  in  a  last  review  capacity.  The  effort  faltered 
for  two  reasons.  First,  Nixon  chose  not  to  request  Congressional  enact- 
ment of  revised  legislation  extending  the  authority  of  the  DCI.  The 


123 

decision  inherently  limited  the  DCI's  ability  to  exert  control  over  the 
intelligence  components.  Thus,  the  DCI  was  once  again  left  to  arbitrate 
as  one  among  equals.  Second,  the  implementation  of  the  directive  was 
less  energetic  and  decisive  than  it  might  have  been.  Helms  did  not  at- 
tempt to  make  recommendations  on  budgetary  allocations  and  instead, 
presented  the  President  with  the  agreed  views  of  the  representatives 
of  the  departmental  intelligence  components.  Furthemiore,  within  the 
Agency,  the  mechanism  for  assisting  the  DCI  in  community  matters 
was  weak.  Early  in  1972  Helms  established  the  Intelligence  Commun- 
ity (IC)  Staff  as  a  replacement  for  the  NIPE  staff  to  assist  in  com- 
munity matters.  Between  the  time  of  the  decision  to  create  such  a  staff 
and  its  actual  organization,  the  number  of  personnel  assigned  was 
halved. 

It  is  likely  that  had  James  Schlesinger  remained  as  DCI,  he  would 
have  assumed  a  vigorous  role  in  the  community,  and  would  have  at- 
tempted to  exercise  the  DCI's  implied  authority.  Schlesinger  altered 
the  composition  of  the  IC  staff  by  reducing  the  number  of  CIA  per- 
sonnel and  increasing  the  number  of  non-Agency  personnel  to  facili- 
tate the  staff's  contacts  with  the  community.  Schlesinger's  primary 
concern  was  upgrading  the  quality  of  the  Agency's  intelligence  analy- 
sis, and  he  had  begun  to  consider  changes  in  the  Office  of  National 
Estimates.  In  addition,  he  made  considerable  reductions  in  personnel — 
with  most  of  the  cuts  occurring  in  the  DDO.^^'^ 

ITnder  Colby,  attempts  at  innovation  continued.  Colby  abolished 
the  Office  of  National  Estimates  and  replaced  it  with  a  group  of  eleven 
senioi"  specialists  in  functional  and  geographical  areas  known  as  Na- 
tional Intelligence  Officers  (NIOs).  NIOs  are  responsible  for  intelli- 
gence collection  and  production  in  their  designated  fields,  and  the 
senior  NIO  is  directly  responsible  to  the  DCI.  The  purpose  of  the 
NIO  system  was  to  establish  better  communication  and  interchange 
between  policymakers  and  analysts  than  had  been  the  case  with  the 
Office  of  National  Estimates. 

These  changes  were  accompanied  by  shifts  in  emphasis  in  the  DDO 
and  the  DDL  In  the  Clandestine  Service  the  scale  of  covert  operations 
was  reduced,  and  by  1972  the  Agency's  paramilitary  program  in  South- 
east Asia  was  dissoh^ed.  Yet,  the  overall  reduction  did  not  affect  the 
fundamental  assumptions,  organization,  and  incentives  governing  the 
DDO.  Indeed,  in  1975  clandestine  activities  still  constituted  37  per- 
cent of  the  Agency's  total  budget. ^^  The  rationale  remains  the  same, 
and  the  operational  capability  is  intact— as  CIA  activities  in  Chile 
illustrated.  While  Soviet  strategic  capabilities  remain  the  first  priority 
for  clandestine  collection  requirements,  in  response  to  recent  inter- 
national developments,  the  DDO  has  increased  its  collection  activities 
in  the  areas  of  terrorism  and  international  narcotics  traffic — with  con- 
siderable success. 

In  the  DDI,  economic  intelligence  has  continued  to  assume  increased 
importance  and  taken  on  new  dimensions.  In  sharp  contrast  to  the 
British  intelligence  service,  which  has  for  generations  emphasized 
international  economics,  the  DDI  onlv  recently  has  begim  developing 
a  capability  in  such  areas  as  international  finance,  the  gold  market, 


"*  See  footnote,  p.  121. 

"  This  does  not  include  DDA  budgetary  allocations  in  support  of  DDO  activi- 


ties. 


124 

and  international  economic  movements.  The  real  impetus  for  this 
change  came  in  August  1971  with  the  U.S.  balance  of  payments  crisis. 
Since  that  time,  and  with  subsequent  international  energy  problems, 
the  demands  for  international  economic  intelligence  have  escalated 
dramatically. 

The  Agency's  technological  capabilities  have  made  a  sustained  con- 
tribution to  policymaking.  By  providing  the  first  effective  means  of 
verification,  CIA's  reconnaissance  systems  facilitated  the  United 
States'  participation  in  arms  control  agreements  with  the  Soviet 
Union,  beginning  with  the  1972  Interim  Agreement  limiting  strategic 
arms. 

In  December  1974  these  developments  and  the  impetus  for  change 
begun  under  Schlesinger  were  overtaken  by  public  revelajtions  of 
alleged  CIA  domestic  activities.  What  had  been  a  consensual  accept- 
ance of  the  CIA's  right  to  secrecy  in  the  interests  of  national  security 
was  rejected.  The  Agency's  vulnerability  to  these  public  revelations 
was  indicative  of  the  degree  to  which  American  foreign  policy  and 
the  institutional  framework  that  supported  that  policy  were  under- 
going redefinition. 

E.    CONCLUSIOX 

A  brief  history  cannot  catalogue  the  many  shifts  in  the  numerous 
CIA  subdivisions  over  a  period  of  nearly  thirty  years.  Instead,  this 
summary  has  attempted  to  capture  the  changes  in  the  CIA's  main 
functional  areas.  Sharing  characteristics  common  to  most  large,  com- 
plex organizations,  the  CIA  has  responded  to,  rather  than  anticipated, 
the  forces  of  change ;  it  has  accumulated  functions  rather  than  redefin- 
ing them ;  its  internal  patterns  were  established  early  and  have  solidi- 
fied ;  success  has  come  to  those  who  have  made  visible  contributions  in 
high-priority  areas.  These  general  characteristics  have  affected  the 
specifics  of  the  Agency's  development : 

— The  notion  that  the  CIA  could  serve  as  a  coordinating  body  and 
that  the  DCI  could  orchestrate  the  process  did  not  take  into  account 
inherent  institutional  obstacles.  Vested  departmental  interests  and 
the  Departments'  control  over  budget  and  management  choices 
frustrated  the  Agency's  and  the  DCI's  ability  to  execute  the  coordina- 
tion function.  These  limitations  exist  today,  when  the  resources  and 
complexities  of  administration  have  escalated  dramatically. 

— The  DDO  and  the  DDI  evolved  out  of  separate,  independent  or- 
ganizations, serving  different  policy  needs.  Strict  compartmentation 
in  the  DDO  reinforced  the  separation.  The  two  components  were  not 
mutually  supportive  elements  in  the  collection  and  analysis  functions. 

— The  activities  of  the  Clandestine  Service  have  reflected  not  what 
the  Agency  can  do  well  but  what  the  demands  of  American  foreign 
policy  have  required  at  particular  times.  The  nature  of  covert  opera- 
tions, the  priority  accorded  them  bv  senior  policymakers,  and  the 
orientation  and  background  of  some  DCIs  have  made  the  clandestine 
mission  the  preeminent  activity  within  the  organization. 

— The  qualities  demanded  of  individuals  in  the  Clandestine  Serv- 
ice— essentially  management  of  people,  provide  the  basis  for  bureau- 
cratic skills  in  the  organization.  These  skills  account  for  the  fact  that 
those  DCIs  who  have  been  Agency  careerists  have  all  come  from  the 
DDO. 


125 

— Growth  in  the  range  of  American  foreicrn  policy  interests  and 
the  DDI's  response  to  additional  requirements  have  resulted  in  an 
increased  scale  of  collection  and  analysis.  Rather  than  rectifying  the 
problem  of  duplication  the  Agency  has  contributed  to  it  by  becoming 
yet  another  source  of  intelligence  production.  The  DDI's  size  and  the 
administrative  process  involved  in  the  production  of  finished  intelli- 
gence precluded  close  association  between  policymakers  and  analysts, 
between  the  intelligence  product  and  policy  informed  by  intelligence 
analysis. 

The  relationship  between  intelligence  analysis  and  policymaking  is 
a  reciprocal  one.  The  creation  of  the  NIO  system  was  in  part  a  recog- 
nition of  the  need  for  close  interaction  between  analysts  and  their 
clients.  If  intelligence  is  to  influence  policy  and  if  policy  needs  are  to 
direct  intelligence  priorities,  senior  policymakers  must  actively  utilize 
the  intelligence  capabilities  at  their  disposal.  For  policymakers  not 
to  do  so  only  wastes  resources  and  encourages  lack  of  direction  in 
intelligence  production.  Likewise,  tlie  Director  of  Central  Intelligence 
or  his  successor  for  management  of  the  community  must  assign  priority 
attention  to  the  roles  of  principal  intelligence  advisor  to  the  President 
and  head  of  the  intelligence  community.  History  has  demonstrated  that 
the  job  of  the  DCI  as  community  manager  and  as  senior  official  of  the 
Agency  are  competing,  not  complementary  roles.  In  the  future  separa- 
tion of  the  functions  may  prove  a  plausible  alternative. 

'Clandestine  activities  will  remain  an  element  of  U.S.  foreign  policy, 
and  policymakers  will  directly  affect  the  level  of  operations.  The  prom- 
inence of  the  Clandestine  Service  within  the  Agency  may  moderate  as 
money  for  and  high-level  Executive  interest  in  covert  actions  diminish. 
However,  DDO  incentives  which  emphasize  operations  over  collec- 
tion and  which  create  an  internal  demand  for  projects  will  continue 
to  foster  covert  action  unless  an  internal  conversion  process  forces  a 
change. 

Over  the  past  thirty  years  the  United  States  has  developed  an  in- 
stitution and  a  corps  of  individuals  who  constitute  the  U.S.  intelli- 
gence profession.  The  question  remains  as  to  how  both  the  institution 
and  the  individuals  will  best  be  utilized. 


VII.  THE  CENTRAL  INTELLIGENCE  AGENCY: 
STATUTORY  AUTHORITY 

The  National  Security  Act  of  1947  provides  the  Central  Intelligence 
Agency  with  statutory  authority  for  its  activities.  Section  102(d)  of 
that  Act  lists  the  following  "powers  and  duties"  for  the  Agency: 

(1)  to  advise  the  National  Security  Council  in  matters  concerning 
such  intelligence  activities  of  the  Government  departments  and  agen- 
cies as  relate  to  national  security ; 

(2)  to  make  recommendations  to  the  National  Security  Council  for 
the  coordination  of  such  intelligence  activities  of  the  departments  'and 
agencies  of  the  Government  as  relate  to  the  national  security ; 

(3)  to  correlate  and  evaluate  intelligence  relating  to  the  national 
security,  and  provide  for  the  appropriate  dissemination  of  such  intel- 
ligence within  the  Government  using  where  appropriate  existing  agen- 
cies and  facilities:  Provided..  That  the  Agency  shall  have  no  police, 
subpena,  law-enforcement  powers,  or  internal-security  functions :  Pro- 
vided further^  That  the  departments  and  other  agencies  of  the  Gov- 
ernment shall  continue  to  collect,  evaluate,  correlate,  and  disseminate 
departmental  intelligence :  And  'pTovid£,d,  further.  That  the  Director 
of  Central  Intelligence  shall  be  responsible  for  protecting  intelligence 
sources  and  methods  from  unauthorized  disclosure ; 

(4)  to  perform,  for  the  benefit  of  the  existing  intelligence  agencies, 
such  additional  services  of  common  concern  as  the  National  Security 
Council  determines  can  be  more  efficiently  accomplished  centrally ; 

(5)  to  perform  such  other  functions  and  duties  related  to  intelli- 
gence affecting  the  national  security  as  the  National  Security  Council 
may  from  time  to  time  direct.^ 

The  CIA  has  engaged  in  the  following  three  types  of  activities, 
none  of  which  is  specifically  mentioned  in  the  1947  legislation:  (1) 
direct  clandestine  collection  of  intelligence;  (2)  covert  action;  and 
(3)  direct  collection  of  information  regarding  the  activities  of  Ameri- 
can nationals  within  the  ITnited  States.  As  the  fact  of  CIA  involve- 
ment in  these  activities  has  become  widely  known,  questions  have  been 
raised  regarding  the  statutory  authority  by  which  the  Agency  under- 
took these  responsibilities. 

It  is  important  to  note  at  this  point  that  the  confusion  which  has 
resulted  from  the  lack  of  specific  legislative  guidelines  with  respect 
to  these  three  kinds  of  activities  miist  rest  with  Congress.  The  lan- 
guan^e  of  the  National  Security  Act,  its  legislative  history,  and  the 
post-enactment  interpretation  of  the  legislation  by  Congress  itself 
indicates  that  the  Act  can  leg'itimatelv  be  constnied  as  authorizing 
clandestine  collection  by  the  CIA.  The  Select  Committee's  record 
shows  that  the  legislating  committees  of  the  House  and  Senate  in- 
tended for  the  Act  to  authorize  the  Agency  to  engage  in  espionage. 
This  activity  could  and  should  have  been  specifically  authorized  in 
the  1949  legislation. 

'50  U.S.C.  403(d). 

(127) 


128 

Authority  for  covert  action  cannot  be  found  in  the  National  Secu- 
rity Act.  The  Committee  finds  that  the  executive  branch  should  have 
approached  Congress  for  authority  for  the  CIA  to  engage  in  such 
activities,  particularly  where  they  involved  the  use  of  force.  At  the 
same  time,  Congress  should  have  acted  in  response  to  well-publicized 
instances  of  covert  action  to  clarify  CIA  authority  in  this  area. 

Finally,  Congress  did  take  decisive  action  in  the  National  Security 
Act  of  1947  to  prevent  the  CIA's  assuming  any  police,  law-enforce- 
ment, or  internal  security  function  in  the  United  States.  Some  of  the 
CIA's  activities  have  been  in  clear  violation  of  that  principle.  Congress 
now  has  a  responsibility,  however,  to  clarify  the  Agency's  authority 
where  CIA's  domestic  activities  are  directly  linked  to  its  foreign 
intelligence  responsibilities. 

A.  Clandestine  Collection  of  Intelligence 

While  the  National  Security  Act  of  1947  authorizes  correlation, 
evaluation,  and  dissemination  of  national  security  intelligence  by  the 
CIA,  nowhere  does  it  specify  that  the  Agency  is  authorized  to  engage 
in  the  direct  collection  of  intelligence.  As  its  authority  to  engage  in 
direct  collection,  the  CIA  has  relied  upon  Section  102(d)  (4)  and  (5) 
of  the  Act,^^  which  authorizes  the  Agency : 

(4)  to  perform,  for  the  benefit  of  the  existing  agencies,  such 
additional  services  of  common  concern  as  the  National  Secu- 
rity Council  determines  can  be  more  efficiently  accomplished 
centrally ; 

(5)  to  perform  such  other  functions  and  duties  related  to 
irttelligence  affecting  the  national  security  as  the  National 
Security  Council  may  from  time  to  time  direct.  50  U.S.C. 
403  (d)  (4)  and  (5). 

The  legislative  history  of  the  1947  Act  does  not  indicate  clearly  that 
the  full  Congress  specifically  intended  by  these  provisions  to  authorize 
direct  clandestine  collection  by  the  CIA.  The  legislating  committees 
discussed  the  issue  in  some  detail  in  executive  session,  but  it  was 
mentioned  only  briefly  in  public  hearings  and  floor  debates.  However, 
the  public  record  does  suggest  that  the  full  Congress  had  access  to 
information  which  indicated  that  the  Act  could  be  construed  as  au- 
thorizing direct  collection.  No  action  was  taken  to  prohibit  such  activ- 
ity. Moreover,  the  1949  enactment  of  the  Central  Intelligence  Agency 
Act  demonstrates  congressional  intent  to  facilitate  clandestine  activ- 
ities, and  thus  congressional  endorsement  of  the  view  that  such  activi- 
ties were  the  legitimate  function  of  the  CIA. 

The  Committee  has  been  able  to  locate  full  records  for  only  one  of  the 
closed  committee  meetings  on  the  National  Security  Act.  In  a  tran- 
script of  the  June  27, 1947  meeting  of  the  House  Committee  on  Expen- 
ditures in  the  Executive  Departments,  executive  branch  representa- 
tives proposed  centralization  of  clandestine  collection  in  the  CIA.  The 
Conunittee  discussed  the  wisdom  of  this  proposal  with  a  number  of 

^*  Memorandum  from  the  CIA  General  Counsel  to  the  Director.  5/7/48 :  memo- 
randum from  the  CIA  General  Counsel  to  the  Deputy  Chief  for  Foreign  Intelli- 
gence, 4/14/61. 


129 

witnesses.^  General  Hoyt  S.  Vandenberg,  then  Director  of  Central 
Intelligence,  suggested  centralized  collection  to  the  Senate  Committee 
on  the  Armed  Services,^  and  other  executive  branch  personnel  who 
participated  in  the  preparation  of  the  Act  have  stated  that  the  Senate 
committee  discussed  the  proposal.*  In  addition,  a  1961  memorandum 
by  CIA  General  Counsel  Lawrence  Houston  and  recent  interviews 
with  Houston  and  former  CIA  Legislative  Counsel  Walter  Pforz- 
heimer  indicate  that  the  possibility  of  including  language  in  the  Act 
specifically  to  authorize  espionage  by  the  CIA  was  discussed.^  Accord- 
ing to  Houston  and  Pforzheimer,  this  proposal  was  rejected  on  the 
grounds  that  it  would  be  inappropriate  for  the  United  States  to  be 
on  record  as  a  participant  in  this  kind  of  activity.^ 

The  House  Committee  was  informed  that  the  Central  Intelligence 
Group,  the  predecessor  agency  to  the  CIA,  had  engaged  in  clandestine 
collection,  and  that  it  relied  for  its  authority  upon  language  in  subsec- 
tions 8  (c)  and  (d)  of  the  Presidential  Directive  of  January  22,  1946 
establishing  the  CIG.'^  The  Committee  was  therefore  specifically  on 
notice  that  this  language,  which  is  almost  identical  to  Section  102(d) 
(4)  and  (5)  of  the  National  Security  Act  of  1947,  had  been  considered 
sufficiently  broad  to  authorize  direct  clandestine  collection.  (The  Presi- 
dential Directive,  like  the  1947  Act,  does  not  mention  collection  of 
any  kind.) 

Committee  re^Dorts  on  the  National  Security  Act  make  no  reference 
to  a  collection  role  for  the  CIA.  In  open  committee  hearings  very  little 
was  said  about  the  issue.  Occasional  remarks  do  indicate,  however,  that 
the  Agency  would  perform  some  kind  of  collection  function.  In  testi- 
mony before  the  Senate  Armed  Services  Committee,  General  Vanden- 
berg  said  that  the  CIA  would  collect  "foreign  intelligence  information 
of  certain  types."  ^  Earlier  in  his  testimony  Genei'al  Vandenberg  had 
referred  to  "certain  .  .  .  activities"  which  intelligence  agencies  such  as 
the  CIA,  military  intelligence,  and  the  FBI  could  not  "expose  ...  to 
the  public  gaze."  ^  General  Vandenberg  had  spoken  with  some  specific- 
ity of  the  need  for  centralizing  clandestine  collections  in  the  CIA  be- 
fore both  the  House  and  Senate  Committees  in  closed  session.  It  can 
be  assumed  that  these  additional  remarks,  which  were  released  to  the 
public,  referred  to  clandestine  collection  as  well. 


^  Transcript.  House  Committee  on  Expenditures  in  the  Executive  Departments, 
Hearings  on  H.R.  2319,  6/27/47  (liereinafter  cited  as  House  transcript),  pp.  10-19, 
53-55.  79^86.  111-112,  118-125,  134-135.  159-164. 

"Testimony  of  General  Hoyt  S.  Vandenberg,  Director  of  Central  Intelligence 
(unsanitized,  now  declassitfied ) ,  Senate  Armed  Services  Committee,  Hearings  on 
S.  758,  4/29/47. 

*  Staff  summary  of  Walter  Pforzheimer,  former  CIA  Legislative  Counsel,  inter- 
view, 3/4/76. 

^  Memorandum  from  the  CIA  General  Counsel  to  the  Deputy  Chief  for  Foreign 
Intelligence,  4/14/61 ;  staff  summary  of  Dawrence  Houston  interview,  6/4/75 ; 
staff  summary  of  Walter  Pforzheimer  interview,  5/20/75. 

No  discussion  of  such  a  proposal  is  reported  in  the  public  record,  but  the  House 
committee  executive  session  transcript  contains  brief  references  to  it.  Allen  Dulles 
testimony.  House  transcript,  p.  59. 

'Houston  (staff  siunmary),  6/4/75. 

'  General  Hoyt  S.  Vandenberg  testimony,  Peter  Vischer  testimony.  House  tran- 
script, pp.  10,  76. 

'  Vandenberg.  Senate  Armed  Services  Committee,  Hearings,  4/29/47,  p.  496. 

'/6i<f,  (p.  492). 


130 

Little  more  was  said  in  public.  Diirino;  the  House  floor  debates.  Rep. 
Biisbey,  a  member  of  the  Committee  on  Expenditures,  expressed  ob- 
jection to  clandestine  collection  bv  the  CIA  and  said  he  hoped  the  bill 
would  be  amended  to  prohibit  snch  activity.^"  No  such  amendment  was 
adopted,  however,  and  Rep.  Holifield,  another  member  of  the  com- 
mittee, later  remarked : 

I  want  to  impress  upon  the  minds  of  the  Members  that  the 
work  of  this  Central  Intellisfence  A<rencv,  as  far  as  the  collec-- 
tion  of  evidence  is  concerned,  is  strictly  in  the  field  of  secret 
forei^  intelligence — what  is  known  as  clandestine  intelli- 
gence." 

The  remarks  of  Representatives  Bnsbey  and  Holifield  indicate  that 
it  was  anticipated  that  the  authority  conveyed  bv  the  bill  extended  to 
clandestine  collection  by  the  CIA.  Still  later  in  the  floor  debate,  how- 
ever. Rep.  Patterson  stated  that  while  he  clearly  wanted  "an  inde- 
pendent intelligence  agency,  working  without  direction  by  our  armed 
services,  with  full  authority  in  operational  procedures,"  he  knew  that 
it  was  "impossible  to  incorporate  such  broad  authority  in  the  bill 
now  before  us."  ^^  Rep.  Patterson  may  have  been  expressing  regret  that 
the  National  Security  Act  did  not  authorize  the  CIA  to  engage  in 
direct  collection  of  intelligence ;  he  may  have  been  expressing  the  view 
that  the  Act  would  riot  give  the  CIA  full  independence  in  its  opera- 
tions from  the  armed  services ;  or  he  may  have  been  referring  to  what 
we  now  describe  as  covert  action. 

Public  references  to  collection  are  too  obscure  and  in  some  cases  too 
ambiffuous  for  the  inference  to  be  drawn  that  the  full  Congress  spe- 
cifically intended  to  authorize  direct  collection  by  the  CIA.  It  would 
require  an  attentive  legislator,  alert  to  the  full  record,  to  be  apprised 
of  the  possibility  of  CIA  participation  in  this  activity  throuo;h  the 
public  hearings  and  debates.  But  the  language  of  Section  102(d)  (4) 
and  (5)  indicates  that  the  Congress  intended  some  flexibility  in  the 
operations  of  the  CIA.  These  provisions  are  sufficientlv  broad  that 
clandestine  collection  of  infonnation  could  reasonablv  fall  within  the 
range  of  activities  which  thev  describe.  There  is  no  substantial  evidence 
that  Congress  intended  specifically  to  exclude  clandestine  collection 
from  the  "services  of  common  concern  .  .  .  for  the  benefit  of  existing 
ao-encies"  or  from  the  "other  functions  and  duties  related  to  intelligence 
afi'ecting  the  national  security"  which  were  authorized  by  the  Act. 

Two  years  after  the  enactment  of  the  National  Securitv  Act.  Con- 
gress passed  the  Central  Intelligence  Agency  Act  of  1949,  50  IT.S.C. 
403a-403i.  The  1949  legislation  was  an  enabling  act;  technically  it 
contributed  nothing  to  the  kinds  of  activities  which  the  Agency  was 
authorized  to  carry  out.  Its  enactment,  however,  sheds  some  light  upon 
what  Congress  thought  it  had  authorized  in  1947. 

There  is  no  doubt  that  the  purpose  of  certain  provisions  of  the  1949 
Act  was  to  protect  clandestine  activities  of  the  CIA.  The  Act  waives 
the  normal  restrictions  placed  on  government  acquisition  of  materiel, 
hiring,  and  accounting  for  funds  expended.  If  Congress  did  not  be- 

'"  93  Cong.  Ree.  9404  (1947) . 
"  lUd,  p.  9430. 
"  TUd,  p.  9447. 


131 

lieve  that  some  type  of  clandestine  activity  had  been  authorized  by 
the  National  Security  Act,  these  provisions  would  not  have  been 
necessary. 

Further,  the  Cono;ress  had  reason  to  believe  that  the  CIA  was  al- 
ready engaged  in  espionage.  Prior  to  passage  of  the  Act,  there  had 
been  discussion  in  the  press  of  CIA  involvement  in  direct  clandestine 
collection.^^  Clandestine  collection  was  specifically  discussed  in  closed 
hearings  on  the  Act,^*  and  finally,  in  floor  debates  Members  of  Con- 
gress referred  to  the  legislation  as  "an  espionage  bill."  ^^  "VA^iile  there 
was  much  debate  on  the  floor  of  both  Houses  as  to  the  wisdom  of  spe- 
cific provisions  of  the  bill  and  the  general  need  for  secrecy  in  the  en- 
actment process,  no  one  suggested  that  the  provisions  of  the  bill  were 
unwarranted  because  the  operations  which  they  were  designed  to 
facilitate  were  not  authorized  by  law. 

The  Central  Intelligence  Agency  Act  appears  to  represent  congres- 
sional endorsement  of  the  view  that  the  National  Security  Act  had  au- 
thorized the  CIA  to  engage  in  direct  clandestine  collection.  That  is  a 
view  consistent  with  the  language  of  the  National  Security  Act  and,  to 
the  degree  that  the  history  addresses  the  issue,  with  its  legislative 
history. 

B.  Covert  Action 

Covert  action  is  defined  as  clandestine  activity  designed  to  influence 
foreign  governments,  events,  organizations  or  persons  in  support  of 
U.S.  foreign  policy  conducted  in  such  a  way  that  the  involvement  of 
the  U.S.  Government  is  not  apparent.  In  its  attempts  directly  to 
influence  events  it  is  distinguishable  from  clandestine  intelligence 
gathering — often  referred  to  as  espionage.  It  has  been  argued  that 
authority  for  the  CIA  to  conduct  covert  action  can  be  found  in  the 
1947  National  Security  Act,  the  1949  Central  Intelligence  Agency  Act 
and  the  post  enactment  interpretation  of  those  acts  by  the  Congress 
and  the  Executive. 

The  National  Security  Act  contains  no  reference  to  covert  action. 
Section  102(d)  (5)  of  the  Act  has  been  cited,  however,  as  the  statutory 
basis  for  covert  action.  That  paragraph  provides  that  the  Agency  shall 
"perform  such  other  functions  and  duties  related  to  intelligence  affect- 
ing the  national  security  as  the  National  Security  Council  may,  from 
time  to  time,  direct."  Paragraph  5  was  cited  by  the  National  Security 
Council  in  authorizing  covert  action  by  the  CIA  in  NSC^— A  and 
NSC  10/2. 

The  language  of  50  U.S.C.  403(d)  (5)  may  in  fact  authorize  abroad 
ran2:e  of  activities  not  otherwise  specified  in  the  Act.  An  important 
limitation  on  such  authorization,  however,  is  that  the  activities  must 
be  "related  to  intelligence  affecting  the  national  security."  Many  covert 
actions  are  "related  to  intelligence"  in  the  sense  that  their  perform- 
ance is  tied  to  clandestine  intelligence  operations,  uses  the  same  meth- 

""The  X  at  Bogrota,"  The  Washington  Post,  4/13/48;  Hanson  W.  Baldwin, 
"Intelligence — II,"  The  New  York  Times,  7/22/48. 

"  Gen.  Hoyt  S.  Vandenberg  testimony,  Honse  Amied  Services  Committee 
Hearing  on  H.R.  5871,  4/8/48.  (The  CIA  Act  was  not  passed  by  the  80th  Con- 
gress in  1948,  but  the  same  bill  reported  by  the  House  Armed  Services  Committee 
in  1948  was  enacted  by  the  81st  Congress  in  1949. ) 

"95  Cong.  Rec.  1946, 1947  (1949). 


132 

ods,  and  yields  an  intelligence  product.  It  must  be  noted,  however, 
that  the  chief  purpose  of  these  operations  is  not  to  gather  intelligence, 
and  that  many  covert  actions,  such  as  the  invasion  of  the  Bay  of  Pigs, 
have  only  the  most  limited  relationship  to  "intelligence  affecting  the 
national  security." 

Given  the  fact  that  some  of  the  actions  which  the  CIA  has  taken  to 
influence  events  in  other  countries  are  arguably  "related  to  intelligence 
affecting  the  national  security",  again  it  may  be  useful  to  examine  the 
legislative  history  of  the  National  Security  Act  to  determine  if  these 
forms  of  covert  action  were  within  the  range  of  activities  which  Con- 
gress intended  to  authorize.  But  there  is  little  in  the  public  record  or 
even  in  the  House  Committee's  executive  session  transcript  which  sheds 
any  light  on  the  intent  of  Congress  with  respect  to  covert  action.  Occa- 
sional references  were  made  to  "operational  activities",^^  "special  oper- 
ations,^' or  "operational  procedures,"  ^^  but  the  context  of  these  re- 
marks indicates  that  they  were  at  least  as  likely  to  refer  to  the 
clandestine  collection  of  intelligence  as  to  covert  action.  In  any  case, 
these  terms  were  never  used  in  such  a  way  as  to  indicate  clearly  that 
the  Congress  intended  to  authorize  the  activities  which  they  encom- 
passed. A  memorandum  by  the  CIA's  general  counsel,  written  soon 
after  the  passage  of  the  Act,  concedes  that  the  legislative  history  con- 
tains nothing  to  show  that  Congress  intended  to  authorize  covert  action 
bytheCIA.^^ 

Neither  the  1947  Act  nor  its  legislative  history,  however,  indicates 
congressional  intent  to  prohibit  covert  actions  by  the  Agency.  As  pre- 
viously noted,  the  Executive  had  intended  from  the  outset  that  the 
CIA  would  engage  in  clandestine  collection  of  intelligence.  The 
flexibility  which  50  U.S.C.  403(d)(5)  conveyed  to  the  Agency, 
together  with  the  capacity  to  act  in  secret  which  was  being  developed 
in  connection  with  its  clandestine  collection  function,  made  the  CIA 
an  attractive  candidate  to  carry  out  these  additional  senstitive  opera- 
tions. The  executive  branch  was  soon  to  seize  upon  this  flexibility  and 
assign  major  covert  operations  to  the  Agency. 

In  December  1947  the  National  Security  Council  instructed  the  CIA 
to  undertake  covert  psychological  operations.^"  Six  months  later  the 
NSC  vastly  expanded  the  range  of  covert  activities  authorized  to  in- 
clude : 

propaganda ;  economic  warfare ;  preventive  direct  action,  in- 
cluding sabotage,  anti-sabotage,  demolition  and  evacuation 
measures;  subversion  against  hostile  states,  including  assist- 
ance to  guerrilla  and  refugee  liberation  groups,  and  support 
of  indigenous  anti-Communist  elements  in  the  threatened 
countries  of  the  free  world.^^ 

Under  the  authority  of  50  U.S.C.  403  (d)(5),  there  was  established  an 
Office  of  Special  Projects  to  conduct  covert  actions. ^^ 

^*  James  Forrestal  testimony,  House  Committee  on  Expenditures  in  the  Execu- 
tive Departments.  Hearings  on  H.R.  2319,  1947,  p.  120. 

"  Memorandum  from  Allen  Dulles,  4/25/47,  Senate  Armed  Services  Committee. 
Hearings  on  S.  758,  p.  529. 

"  93  Cong.  Rec,  9447,  1947. 

"  Memorandum  from  the  CIA  General  Counsel  to  the  Director,  9/25/47. 

""  NSC-4-A,  12/17/47. 

"^  NSC  Directive,  6/18/48. 


133 

All  of  this  occurred  prior  to  enactment  of  the  Central  Intelligence 
Agency  Act  in  1949.  As  noted  previously,  the  CIA  Act  included  pro- 
visions the  clear  purpose  of  which  was  to  protect  the  security  of  secret 
operations.  What  is  not  clear  is  whether  these  operations  were  meant 
by  the  Congress  to  include  covert  action  as  we  now  understand  the 
term. 

By  1948  the  CIA  was  already  engaged  in  a  variety  of  covert  actions. 
In  seeking  passage  of  the  Central  Intelligence  Agency  Act  the  Execu- 
tive anticipated  that  its  provisions  would  facilitate  these  operations, 
as  well  as  covert  collection.  Remarks  in  executive  session  of  the  House 
Committee  on  Armed  Services  indicate  that  such  operations  were  used 
to  justify  passage  of  the  Act,  and  that  this  committee  knew  that  plans 
for  coveit  action  were  then  pending,  which  the  Act  was  necessary  to 
implement.-^ 

Tiiere  is  no  evidence  that  the  full  Congress,  on  the  other  hand,  knew 
or  understood  the  range  of  clandestine  activities,  including  covert  ac- 
tion, which  the  Executive  was  undertaking.  The  Connnittee  reports 
on  the  bills  that  were  to  become  the  Central  Intelligence  Agency  Act 
include  no  reference  to  covert  action,  and  the  floor  debates  do  not  indi- 
cate that  the  Congress  knew  that  covert  action,  as  opposed  to  clandes- 
tine intelligence  gathering,  was  being  or  would  be  undertaken  by  the 
CIA.-*  Thus,  while  the  very  nature  of  some  of  the  provisions  of  the 
1949  Act  indicates  that  the  Congress  assumed  that  the  CIA  would  en- 
gage in  some  clandestine  activities,  and  while  the  legislative  histoi'y 
of  that  Act  indicates  that  these  operations  were  expected  to  include 
espionage,  there  is  nothing  in  the  legislation  or  its  history  to  indicate 
that  the  full  Congress  meant  by  the  Act  to  facilitate  covert  action. 

It  has  been  suggested  that  congressional  provision  of  funds  to  the 
CIA  indicates  congressional  approval  of,  or  authorization  for  the 
CIA's  conduct  of  covert  action.  Such  a  premise  was  offered  in  a 
1962  internal  memorandum  of  the  Agency's  General  Counsel  -^  and 
in  a  Justice  Department  memorandum  dated  two  days  later.^*^  In 
December  1975  this  argument  was  made  publicly  by  the  Special  Coun- 
sel to  the  Director  of  the  CIA  in  testimony  before  the  House  Select 
Committee  on  Intelligence.  The  Special  Counsel  said  that  given  "CIA 
reporting  of  its  covert  action  programs  to  Congress,  and  congres- 
sional appropriation  of  funds  for  such  programs"  the  "law  is  clear 
that,  under  these  circumstances.  Congress  has  effectively  ratified  the 
authority  of  the  CIA  to  plan  and  conduct  covert  action  under  the 
direction  of  the  President  and  the  National  Security  Council."  " 

The  principal  problem  with  this  analysis  is  that  the  CIA  has  not 
reported  its  covert  action  programs  to  Congress  as  a  whole,  but  only 


'^  Vandenberg,  House  Armed  Services  Committee  Hearings  on  H.R.  5871,  4/8/ 
48. 

"*  It  was  remarked  in  the  House  debates,  however,  in  the  context  of  a  discus- 
sion of  intelligence  gathering  that  "in  spite  of  all  our  wealth  and  power  and 
might  we  have  been  extremely  weak  in  psychological  warfare,  notwithstanding 
the  fact  that  an  idea  is  perhaps  the  most  powerful  weapon  on  this  earth." 
95  Cong.  Rec.  1947  (1949). 

"Memorandum  from  the  CIA  General  Counsel  to  the  Director,  1/15/62,  p.  2. 

^  Memorandum,  OflBce  of  Legislative  Counsel,  Department  of  Justice,  1/17/62, 
pp.  12-13. 

"Testimony  of  Mitchel  Rogovin,  Special  Counsel  to  the  Director  of  Central 
Intelligence,  House  Select  Intelligence  Committee  Hearings,  12/9/75,  pp.  1735- 
1736. 


134 

to  a  few  members  of  a  few  committees  of  Congress.  Small  subcom- 
mittees of  the  Armed  Services  and  Appropriations  Committees  in  each 
House  were  briefed  to  some  extent  on  these  activities  until  1974,  when 
the  Foreign  Assistance  Act  was  amended  to  require  that  six  com- 
mittees of  Congress  be  informed  with  respect  to  those  foreign  activ- 
ities of  the  CIA  which  are  not  intended  solely  for  obtaining  necessary 
intelligence. 

Other  members  of  Congress  may  ultimately  have  become  gener- 
ally aware  that  the  CIA  engaged  in  some  non-intelligence  production 
operations;  the  role  of  the  CIA  in  the  Bay  of  Pigs  operation,  for 
example,  was  widely  known.  Still  it  cannot  be  said  that  Congress  as 
a  whole,  knowing  that  the  Agency  made  a  practice  of  covert  actions, 
ratified  such  operations  by  appropriating  funds  for  them.  The  Con- 
gress as  a  whole  has  never  voted  for  appropriations  for  the  CIA.  The 
funds  provided  to  the  CIA  are  concealed  in  the  appropriations  made 
to  other  agencies,  they  are  then  transferred  to  the  CIA,  pursuant  to 
the  provisions  of  the  CIA  Act  of  1949,  with  the  approval  of  the  0MB 
and  selected  members  of  the  Appropriations  Committees.  Congress 
as  a  whole  has  known  neither  how  much  the  CIA  would  receive  nor 
where  the  funds  which  would  be  transferred  to  the  CIA  were  con- 
cealed. A  question  has  been  raised  as  to  whether  the  CIA  is  even 
"appropriated"  funds  pursuant  to  constitutional  requirements.^^ 

More  convincing  than  the  argument  that  Congress  has  ratified  covert 
action  by  appropriation  is  the  suggestion  that  ratification  has  been 
by  acquiescence.  Although  the  Congress  as  a  whole  has  not  made 
appropriations  for  covert  action,  in  recent  years  it  has  been 
aware  that  funds  for  such  operations  were  being  channeled  to  the 
CIA.  Congress  has  had  the  power  to  put  an  end  to  these  activities  by 
attaching  conditions  to  the  use  of  funds  appropriated  by  it.  The 
failure  to  exercise  this  power  may  be  interpreted  as  congressional 
ratification  of  CIA  authority. 

In  December  1974  the  Congress  passed  a  set  of  amendments  to  the 
Foreign  Assistance  Act  of  1961.  Section  82  of  these  amendments, 
which  became  Section  662  of  the  1961  Act  and  is  knowm  as  the  Hughes- 
Ryan  Amendment,  provides : 

Limitations  on  intelligence  activities. — (a)  No  funds  appro- 
priated under  authority  of  this  or  any  other  act  may  be  ex- 
pended by  or  on  behalf  of  the  Central  Intelligence  Agency 
for  operations  in  foreign  countries,  other  than  activities  in- 
tended solely  for  obtaining  necessary  intelligence,  unless  and 
until  the  President  finds  that  each  such  operation  is  impor- 
tant to  the  national  security  of  the  United  States  and  reports, 
in  a  timely  fashion,  a  description  and  scope  of  such  operation 
to  the  appropriate  committees  of  the  Congress,  including  the 
Committee  on  Foreign  Relations  of  the  United  States  Senate 
and  the  Committee  on  Foreign  Affairs  of  the  United  States 
House  of  Representatives,  (b)  The  provisions  of  subsection 
(a)  of  this  section  shall  not  apply  during  military  operations 
initiated  by  the  United  States  under  a  declaration  of  war  ap- 
proved by  the  Congress  or  an  exercise  of  powers  by  the  Presi- 
dent under  the  War  Powers  Resolution.  22  U.S.C.  2422. 


"  Elliot  Maxwell.  "The  CIA's  Secret  Funding  and  the  Constitution,"  Yale  Law 
Jmmal,  Vol.  84  (1975),  pp.  608-636. 


135 

The  Huo;]ies-Ryan  Amendment  was  cited  by  the  Special  Counsel  to 
the  Director  of  the  Central  Intelligence  Ao^ency  when  he  appeared 
before  the  House  Select  Committee  on  Intelligence  to  argue  that  Con- 
gress has  "both  acknowledged  and  ratified  the  authority  of  the  CIA 
to  plan  and  conduct  covert  action."  He  said  that  the  provision  "clearly 
implies  that  the  CIA  is  authorized  to  plan  and  conduct  covert 
action."  ^^ 

Section  32  does  not  explicitly  authorize  covert  action  by  the  Central 
Intelligence  Agency.  On  its  face  it  contributes  nothing  to  the  CIA's 
authority  to  do  anything.  It  can  be  argued,  however,  that  the  amend- 
ment represents  recognition  by  the  Congress  that  authority  for  the 
CIA  to  engage  in  covert  action  does  exist.  This  argument  has  consid- 
erable merit.  While  certain  restrictions  were  placed  upon  the  conduct 
of  covert  action,  it  was  not  foreclosed  as  it  could  have  been.  On  the 
other  hand,  it  can  be  argued  that  the  amendment  merely  represents 
Congress'  acknowledoement  that  the  CIA  does  cany  out  non-intelli- 
gence production  activities.  The  purpose  of  Section  32  was  to  acquire 
information  about  these  operations  so  that  a  decision  could  be  made 
about  their  legitimacy.  This  argument  is  bolstered  by  the  fact  that  a 
number  of  the  proponents  of  the  amendment,  including  its  sponsor 
in  the  Senate,  saw  the  amendment  as  a  temporary  measure.  Senator 
Hughes  stated  on  the  floor  that  the  measure  "provides  a  temporary 
arrangement,  not  a  pemianent  one,  recognizing  that  a  permanent  ar- 
rangement is  in  the  process  of  being  developed."  ^°  Thus  the  amend- 
ment might  be  seen  not  as  congressional  ratification  of  the  CIA's  au- 
thority to  conduct  covert  action,  but  as  a  temporarv  measure  to  plaice 
limits  on  what  the  CIA  was  doing  anyway.  At  the  same  time,  the 
measure  requires  reporting  so  that  Congress,  traditionally  deprived 
of  information  about  covert  action,  can  determine  what  further  action 
to  take  with  respect  to  this  activity. 

The  significance  of  the  events  up  to  1974  is  that  until  that  date 
Congress  could  escape  a  full  share  of  responsibility  for  the  CIA's 
covert  actions.  Enactment  of  the  Hughes-Ryan  Amendment,  howevei', 
does  represent  formal  acknowledgement  by  Congress  that  the  CIA 
engages  in  operations  in  foreign  countries  for  purposes  other  than 
obtaining  intelligence.  Since  passage  of  that  Act,  six  standing  com- 
mittees of  Congress  have  received  information  on  specific  CIA  covert 
actions,  and  public  hearings  have  been  held  on  the  subject  by  the 
Select  Committee.  The  full  Congress  now  has  information  on  covert 
action,  and  it  has  the  power  to  prohibit  or  further  restrict  this  activity, 
either  directly  or  through  limitations  on  the  expenditure  of  funds.  If 
Congress  takes  no  such  action,  a  convincing  argument  can  be  made  that 
it  has  authorized  covert  action  by  acquiescence. 

C.  Domestic  AcTI^^TIES 

The  record  shows  that  the  CIA  has  engaged  in  a  variety  of  clandes- 
tine collection  programs  directed  at  the  activities  of  Americans  within 
the  United  States.  Some  of  these  activities  have  raised  constitutional 


Rogovin,  House  Select  Committee  on  Intelligence,  Hearings,  12/9/75,  p.  1737. 
'  Cong.  Rec.  S18062,  daily  ed.,  10/2/74. 


136 

questions  related  to  the  rights  of  Americans  to  engage  in  political 
activity  free  from  government  surveillance.  But  they  have  also  raised 
questions  about  (1)  the  authority  of  the  CIA,  under  its  charter,  to 
collect  and  use  information  about  Americans,  and  (2)  the  extent  to 
which  the  specific  statutory  prohibition  on  police  and  internal  security 
functions  by  the  CIA  restricts  these  domestic  activities. 

The  National  Security  Act  of  1947  defines  the  duties  of  the  CIA  in 
terms  of  "intelligence"'  or  "intelligence  relating  to  the  national  secur- 
ity." The  legislative  history  of  the  Act  clearly  shows  that  Congress 
intended  the  activities  authorized  by  this  language  to  be  related  to 
foreign  intelligence.^^  This  construction  is  aided  by  the  statute's  provi- 
sion that  "the  Agency  shall  have  no  police,  subpena,  law  enforcement 
power,  or  internal-security  functions,"  (50  U.S.C.  403(d)  (3)).  In  re- 
cent years,  however,  the  executive  branch  has  interpreted  foreign  intel- 
ligence broadly  to  include  intelligence  programs  the  purpose  of  which 
is  to  determine  foreign  influence  on  dissident  domestic  groups.  These 
programs  have  involved  intelligence  gathering  within  the  ITnited 
States  directed  at  United  States  nationals.  They  have  continued,  under 
Presidential  orders,  even  when  no  significant  foreign  connections  were 
found.  Even  if  these  investigations  had  been,  based  at  the  outset  upon 
specific  evidence  of  contact  between  domestic  groups  and  hostile  for- 
eign governments  or  powers,  however,  and  even  if  they  liad  been 
terminated  immediately  when  they  revealed  no  foreign  threat,  a  ques- 
tion arises  as  to  whether  such  investigations  would  be  authorized  by 
the  National  Security  Act. 

The  legislative  history  of  the  Act  shows  that  in  establishing  the  CIA 
Congress  contemplated  an  agency  wliich  not  only  would  be  limited 
to  foreign  intelligence  operations  but  one  which  would  conduct  very 
few  of  its  operations  within  the  ITnited  States.  It  was  contemplated 
that  the  Agency  would  have  its  headquarters  here,^-  and  in  House 
Committee  hearings  in  executive  session  the  possibility  of  seeking  for- 
eign intelligence  information  from  private  American  citizens  who 
traveled  abroad  was  discussed  with  approval. ^^  But  in  public  and  in 
private  it  was  generally  agreed  among  legislators  and  representatives 
of  the  Executive  that  the  CIA  would  be  "confined  out  of  the  continen- 
tal limits  of  the  United  States  and  in  foreign  fields,"  ^*  that  it  should 

^  The  purpose  of  the  CIA  was  to  take  over  the  functions  of  the  CTG,  which  had 
acted  as  a  foreign  intelligence  agency.  The  assumption  that  the  CIA  would  con- 
tinue in  the  foreign  intelligence  tifld  underlies  much  of  the  legislative  delmtes 
over  Section  102  of  the  National  Security  Act.  For  example,  in  the  House  floor 
dehates  it  was  remarked  that,  "The  Central  Intelligence  Agency  deal.s  with  in- 
telligence outside  the  United  States,"  [93  Cong.  Rec.  9494  (1947)].  that  "the 
Central  Intelligence  Agency  is  supposed  to  operate  only  abroad"  (Ibid,  p.  9448) 
and  that  "the  Central  Intelligence  Agency  deals  only  with  external  security" 
(TMd,  p.  9447).  It  was  frequently  remarked  that  the  Agency  was  not  to  be  per- 
mitted to  act  as  a  domestic  police  or  "Gestapo."  [Senate  Armed  Services  Com- 
mittee, Hearings  on  S.  758.  (1947),  p.  497:  House  Expenditures  in  the  Executive 
Departments  Committee,  Hearings  on  H.R.  2319  (1947),  pp.  127.  438,  479-481; 
93  Cong.  Rec.  9413,  9422,  9443  (1947).]  Specific  care  was  taken  to  prevent  the  CIA 
or  the  Director  of  Central  Intelligence  from  interfering  in  any  way  with  the 
functions  of  the  FBI  [see  50  U.S.C.  403  (e)  and  93  Cong.  Rec.  9447-9448  (1947).] 

^  Vandenberg  testimony.  House  transcript,  6/27/47,  p.  60. 

^'  Allen  Dulles  testimonv,  Ihid.,  p.  52-53,  66. 

^  Hid.,  p.  59. 


137 

have  no  "police  power  or  anything  else  within  the  confines  of  this  coun- 
try," ^^  and  that  it  was  "supposed  to  operate  only  abroad."  ^^ 

This  view  was  reiterated  in  the  legislative  history  of  the  Central 
Intelligence  Agency  Act  of  1949.  The  following  exchange  took  place 
between  Kep.  Holifield  and  Rep.  Sasscer  of  the  House  Committee  on 
the  Armed  Services,  which  had  reported  the  1949  bill : 

Mr.  Holifield.  I  would  like  to  question  the  gentleman  from  Mis- 
souri. On  page  4  of  the  report,  subsection  5(b),  it  is  provided  that  an 
employee  while  in  this  country  on  leave  may  be  assigned  to  temporary 
duty  in  the  United  States  for  special  purposes  or  reorientation  prior  to 
i-eturning  to  foreign  service. 

In  the  original  unification  bill  passed  through  the  Committee  on 
Expenditures,  of  which  I  am  a  member,  we  had  the  setting  up  of  this 
CIA.  It  was  clearly  brought  out  at  that  time  that  no  internal  security 
work  of  any  kind  would  be  done  by  the  CIA ;  that  all  of  its  intelligence 
work  would  be  done  in  a  foreign  field.  In  vicAv  of  this  particular  para- 
graph here  I  want  to  be  assured  at  this  time  that  such  special  duties  as 
are  mentioned  here,  or  reorientation,  do  not  apply  to  security  functions 
in  the  United  States. 

Mr.  Sasscer.  Mr.  Speaker,  if  the  gentleman  will  yield,  I  will  say  to 
the  gentleman  that  that  is  correct,  that  this  bill  is  in  no  wise  directed  to 
internal  security.  If  they  come  back  here  it  is  purely  a  matter  of  Jeave, 
and  reorientation,  and  training  to  go  back  into  their  work  in  foreign 
countries.  95  Cong.  Rec.  1947-1948  ( 1949) . 

The  bill  which  had  been  submitted  by  the  Executive  to  establish  the 
Agency  in  1947  incorporated  by  reference  the  provisions  of  the  Presi- 
dential Directive  of  January  22,  1946,  which  established  the  CIG  and 
provided  that  it  would  have  "no  police,  law  enforcement  or  internal 
security  functions."  "  Partly  in  an  eifort  to  ensure  that  the  CIA  did  not 
exceed  the  bounds  which  Congress  contemplated  foi-  its  activities,  the 
bill  was  amended  to  include  this  prohibition  and  other  provisions  of  the 
1946  Directive  in  its  text.  Members  of  Congress  were  concerned  that 
the  Directive  could  be  amended,  without  consulting  Congress,  to  assign 
to  the  CIA  responsibilities  which  would  affect  the  rights  of  the  Ameri- 
can people.  ^^ 


=^  Ibid.,  p.  GO. 

*"  93  Cong.  Rec.  9448  (1947) . 

^  The  Presidential  Directive  also  specified  at  Section  9  that  "Nothing  contained 
herein  shall  be  construed  to  authorize  the  making  of  investigations  inside  the 
continental  limits  of  the  United  States  and  its  possessions  except  as  provided  by 
law  and  Presidential  Directives."  According  to  Lawrence  Houston,  this  provision 
had  been  added  to  the  Directive  at  the  request  of  the  FBI,  which  was  concerned 
that  the  CIG  should  not  become  involved  in  investigating  subversive  groups  in 
the  United  States.  It  was  not  included  in  the  statutory  draft,  however,  because 
of  an  agreement  between  the  CIG  and  the  FBI  that  CIG  could  gather  foreign 
intelligence  within  the  United  States  from  such  sources  as  businessmen  who 
traveled  abroad. (Lawrence  Houston  testimony,  President's  Commission  on  CIA 
Activities,  3/17/75,  pp.  1656-1657.) 

^  Dulles  testimony.  House  transcript.  6/27/47,  pp.  57-58.  ^V^len  General  Vanden- 
berg  was  consulted  about  this  possibility  in  executive  session  of  the  House  Com- 
mittee on  Executive  Expenditures,  he  responded,  "No  sir;  I  do  not  think  there 
is  anything  in  the  bill,  since  it  is  all  foreign  intelligence,  that  can  possibly  affect 
any  of  the  privileges  of  the  i>eople  of  the  United  States."  But  Congress  continued 
to  be  concerned  about  the  potential  for  a  secret  domestic  police  in  the  CIA.  As 
Rep.  Brown  responded  to  General  Vandenberg,  "There  are  a  lot  of  things  that 
might  affect  the  privileges  and  rights  of  the  people  of  the  United  States  that  are 
foreign,  you  know."  (Vandenberg  testimony  Ibid.,  p.  32.) 


69-983  O  -  76  -  10 


138 

By  codifying  the  prohibition  against  police  and  internal  security 
functions,  Congress  apparently  felt  that  it  had  protected  the  American 
people  from  the  possibility  that  the  CIA  might  act  in  any  way  that 
would  have  an  impact  upon  their  rights. 

The  CIA,  however,  has  interpreted  the  internal  security  prohibition 
narrowly  to  exclude  investigations  of  domestic  activities  of  American 
groups  for  the  purpose  of  determining  foreign  associations.  But  his- 
tory indicates  that  at  the  time  of  enactment  of  the  National  Security 
Act,  threats  to  "internal  security"  were  widely  understood  to  include 
domestic  groups  with  for-eign  connections.  Investigations  by  the  FBI 
of  American  groups  w^ith  no  such  connections,  in  fact,  have  been  a 
i^ecent  phenomenon.  The  original  order  from  President  Roosevelt  to 
J.  Edgar  Hoover  to  begin  internal  security  operations  was  to  investi- 
gate foreign  communist  and  fascist  influence  within  the  United 
States.^^  There  is  no  evidence  that  by  1947  these  investigations  were 
considered  foreign  intelligence. 

The  CIA's  domestic  intelligence  programs  have  not  relied  for  their 
authority  solely  upon  the  premise  that  the  agency's  mandate  to  engage 
in  foreign  intelligence  activities  includes  information  gathering  on 
foreign  contacts  of  domestic  groups.  As  authority  for  some  of  its 
operations  with  the  United  States,  the  Agency  has  relied  upon  Sec- 
tion 102(d)  (3)  of  the  National  Security  Act,  Avhich  charges  the  Direc- 
tor of  Central  Intelligence  with  responsibility  to  protect  intelligence 
sources  and  methods  from  unauthorized  disclosure.'*" 

The  CIA  has  construed  the  sources  and  methods  language  broadly  to 
authorize  investigation  of  domestic  groups  whose  activities,  including 
demonstrations,  have  potential,  however  remote,  for  creating  threats  to 
CIA  installations,  I'ecruiters  or  contractors.  In  the  course  of  carrying 
out  tliese  investigations  the  Agency  has  collected  general  information 
about  the  leadership,  funding,  activities,  and  policies  of  targeted 
groups. 

These  activities  have  raised  serious  questions  as  to  (1)  whether  such 
a  broad  interpretation  of  the  sources  and  methods  language  is  consist- 
ent with  the  intent  of  Congress  in  enacting  that  provision,  and  (2) 
again,  whether  such  an  interpretation  is  consistent  with  the  statutory 
prohibition  against  conduct  by  the  CIA  of  internal  security  functions. 

The  sources  and  methods  langiiaixe  was  discussed  only  briefly  in  the 
recorded  legislative  history  of  the  National  Security  Act.  As  originally 
drafted,  the  proposed  Act  had  charged  the  Director  with  "fully"  pro- 
tecting sources  and  methods.  In  the  House  Committee  executive  ses- 
sion, however,  General  Vandenburg  suggested  that  the  Director  could 
not  possibly  "fully"  protect  sources  and  methods,  and  the  word  "fully" 
was  subsequently  dropped.*^''  According  to  the  former  General  Counsel 
to  the  CIA,  who  was  privv  to  many  of  the  discussions  and  debates  on 
the  legislation  as  it  was  being  prepared,  the  purpose  of  the  sources  and 
methods  provision  was  essentially  to  allay  concern  in  the  military 
services  that  the  Agency  would  not  operate  with  adequate  safeguards 
to  protect  the  services'  intelligence  secrets.^^  Despite  congressional 

"  See  Domestic  Intelligence  Report,  p.  25. 
^^  See  detailed  report  on  CHAOS  report. 

*^  Houston.  President's  Commission  on  tbe  CIA.  3/17/75,  pp.  1654-1655 ;  Staff 
summary  of  Lawrence  Houston  interview,  6/11/75. 
"°  Vandenberg  testimony  House  transcript,  6/27/47,  p.  28. 


139 

concern,  expressed  again  and  again  during  hearings  and  floor  de- 
bates on  the  bill,  that  the  CIA  was  to  have  no  potential  for  in- 
fringing upon  the  rights  of  American  citizens  and  that  it  was  to  be 
virtually  excluded  from  acting  within  the  United  States,  no  one  ques- 
tioned whether  the  sources  and  methods  language  would  raise  prob- 
lems in  this  area.  The  lack  of  interest  in  the  provision  suggests  that  it 
was  not  viewed  as  conveying  new  authority  to  investigate;  rather  it 
charged  the  Director  of  Central  Intelligence  Agency  with  responsibil- 
ity to  use  the  authority  which  he  already  had  to  protect  sensitive  mtel- 
ligence  information.  This  could  mean  implementing  strict  security 
procedures  within  CIA  facilities  and  conducting  background  investi- 
gations of  CIA  personnel  (although  according  to  the  former  Agency 
General  Counsel,  the  CIA  first  requested  that  the  FBI  perform  this 
investigative  function;  J.  Edgar  Hoover  refused  to  assume  this  re- 
sponsibility on  grounds  of  insufficient  personnel  within  his  own  Bu- 
reau*-). Given  the  prohibition  against  internal  security  functions,  it 
is  unlikely  that  the  provision  was  meant  to  include  investigations  of 
private  American  nationals  who  had  no  contact  with  the  CIA,  on  the 
grounds  that  eventually  their  activities  might  threaten  the  Agency. 


*''  Houston,  President's  Commission  on  CIA  activities  within  the  United  States, 
3/17/75,  pp.  1655-1656. 


VIII.  COVERT  ACTION 


"o  activity  of  the  Central  Intelligence  Agency  has  engendered  more 
troversy  and  concern  than  "covert  action,"  the  secret  use  of  power 


No 
controversy 

and  persuasion.  The  contemporary  definition  of  covert  action  as  used 
by  the  CIA — "any  clandestine  operation  or  activity  designed  to  influ- 
ence foreign  governments,  organizations,  persons  or  events  in  support 
of  United  States  foreign  policy" — suggests  an  all-purpose  policy  tool. 
By  definition,  covert  action  should  be  one  of  the  CIA's  least  visible 
activities,  yet  it  has  attracted  more  attention  in  recent  yeai-s  than  any 
other  United  States  foreign  intelligence  activity.  The  CIA  has  been 
accused  of  interfering  in  the  internal  political  affairs  of  nations  rang- 
ing from  Iran  to  Chile,  from  Tibet  to  Guatemala,  from  Libya  to  Laos, 
from  Greece  to  Indonesia.  Assassinations,  coups  d'etat,  vote  buying, 
economic  warfare — all  have  been  laid  at  the  doorstep  of  the  CIA.  Few 
political  crises  take  place  in  the  world  today  in  which  CIA  involve- 
ment is  not  alleged.  x\s  former  Secretary  of  Defense  Clark  Clifford 
told  the  Committee : 

The   knowledge  regarding  such   operations  has  become  so 
widespread  that  our  country  has  been  acrused  of  being  re- 
sponsible for  practically  every  internal  difficulty  that  has 
occurred  in  every  country  in  the  world. ^ 
Senate    Resohitioii   21    authorized   the    Conunittee   to   investigate 

"the  extent  and  necessity  of  overt  and  covert  intelligence  activities  in 
the  LTnited  States  and  abroad."  -  In  conducting  its  inquiry  into  covert 
action,  the  Committee  addressed  several  sets  of  questions: 

— First,  what  is  the  past  and  present  scope  of  covert  action  ? 
Has  covert  action  been  an  exceptional  or  commonplace  tool  of 
United  States  foreign  policy?  Do  present  covert  operations 
meet  the  standard — set  in  the  Hughes-Ryan  amendment  to 
the  1974  Foreign  Assistance  Act — of  "important  to  the  na- 
tional security  of  the  ITnited  States  ?" 

— Second,  what  is  the  value  of  covert  action  as  an  instru- 
ment of  United  States  foreign  policy  ?  How  successful  have 
covert  operations  been  over  the  years  in  achieving  short-range 
objectives  and  long-term  goals  ?  What  have  been  the  effects  of 
these  operations  on  the  "targeted"  nations?  Have  the  costs  of 
these  operations,  in  terms  of  our  reputation  throughout  the 
world  and  our  capacity  for  ethical  and  moial  leadership, 
outweighed  the  benefits  achieved? 


^  Clark  Clifford  testimony.  12/5/75.  Hearings.  Vol.  7.  p.  51. 

'  Senate  Resolution  21,  Section  2,  Clause  14.  The  CIA  conducts  several  kinds  of 
covert  intelligence  activities  abroad  :  clandestine  collection  of  positive  foreign 
intelligence,  counterintelligence  (or  liaison  with  local  services),  and  covert 
action.  Although  there  are  a  variety  of  covert  action  techniques,  most  can  he 
grouped  into  four  broad  categories:  political  action,  propaganda,  paramilitary, 
and  economic  action. 

(141) 


142 

— Third,  have  the  techniques  and  methods  of  covert  action 
been  antithetical  to  our  principles  and  ideals  as  a  nation? 
United  States  officials  have  been  involved  in  plots  to  assassi- 
nate foreig;n  leaders.  In  Chile,  the  ITnited  States  attempted 
to  overthrow  a  democratically  elected  orovemment.  INIany 
covert  operations  appear  to  violate  our  international  treaty 
obligations  and  commitments,  such  as  the  charters  of  the 
United  Nations  and  Organization  of  American  States.  Can 
these  actions  be  justified  when  our  national  security  interests 
are  at  stake  ? 

— Fourth,  does  the  existence  of  a  covert  action  capability 
distort  the  decisionmaking  process?  Covert  operations  by 
their  nature  cannot  be  debated  openly  in  vrays  required  by 
a  constitutional  system.  However,  has  this  meant  that,  on 
occasion,  the  Executive  has  resorted  to  covert  operations  to 
avoid  bureaucratic.  Congressional,  and  public  debate?  Has 
this  contributed  to  an  erosion  of  trust  between  the  executive 
and  legislative  branches  of  government  and  between  the 
government  and  the  people? 

— Fifth,  what  are  the  implications  of  maintaining  a 
covert  action  capability,  as  presently  housed  in  the  CTA's 
Directorate  for  Operations?  Does  the  very  existence  of  this 
capability  make  it  more  likely  that  covert  operations  will  be 
presented  as  a  policy  alternative  and  be  implemented?  Has 
the  maintenance  of  this  standing  capability  generated,  in 
itself,  demands  for  more  and  more  covert  action?  Conversely, 
what  are  the  implications  of  7wt  maintaining  a  covert  action 
capability?  Will  our  national  securitv  be  imperiled?  Will  our 
policymakers  he  denied  a  valuable  policv  option  ? 

— ^Sixth,  is  it  possible  to  accomplish  many  of  our  covert 
objectives  through  overt  means?  Radio  Free  Europe  and 
Radio  Liberty  may  be  instructive  in  this  regard.  For  years 
RFE  and  RL  were  operated  and  subsidized,  covertly,  by  the 
CTA.  Today  they  operate  openlv.  Could  other  CTA  covert 
activities  be  conducted  in  a  similar  manner? 

— Finally,  should  the  ITnited  States  continue  to  maintain  a 
covert  action  capability?  If  so,  should  there  be  restrictions 
on  certain  kinds  of  activities?  What  processes  of  authoriza- 
tion and  review,  both  within  the  executive  and  legislative 
branches,  should  be  established? 

Over  the  past  year,  the  Committee  investigated  several  major 
covert  action  programs.  These  programs  were  selected  to  illustrate 
(1)  covert  action  techniques,  ranging  from  propaganda  to  paramili- 
tary activitie<-',  from  economic  action  to  subsidizing  and  supporting  for- 
eign political  parties,  media,  and  labor  organizations;  (2)  different 
kinds  of  "target"  countries,  from  developed  Western  nations  to  less 
developed  nations  in  Africa,  Asia  and  Latin  America;  (B)  a  broad 
time  span,  from  1947  to  the  present;  and  (4)  a  combination  of  cases 
that  the  CIA  considers  to  be  representative  of  success  and  failure. 
One  of  the  Committee's  case  studies,  Chile,  was  the  subject  of  a 
publicly  released  staff  report.^  It  served  as  background  for  the  Com- 

"  Senate  Select  Committee.  "Covert  Action  in  Cliile." 


143 

mittee's  public  session  on  covert  action.*  During  its  covert  action  in- 
quiry, the  Connnittee  took  extensive  testimony  in  executive  session 
and  received  l-i  briefings  from  the  CIA.  The  stall'  interviewed  over 
120  persons,  inckiding  IJi  former  Ambassadors  and  12  former  CliV 
Station  Chiefs.  The  successor  Senate  intelligence  oversight  comniit- 
tee(s)  will  inherit  the  Connnittee's  chassified  covert  action  case  studies 
as  well  as  a  rich  documentary  base  for  future  consideration  of  covert 
action. 

In  addition  to  the  major  covert  action  case  studies,  the  Committee 
spent  five  months  investigating  alleged  plots  to  assassinate  foreign 
leaders.  This  inquiry  led,  inevitably,  into  covert  action  writ  large. 
Plots  to  assassinate  Castro  could  not  be  understood  unless  seen  in 
the  context  of  Operation  MONGOOSE,  a  massive  covert  action 
program  designed  to  "get  rid  of  Castro."  The  death  of  General  Schnei- 
der in  Chile  could  not  be  understood  unless  seen  in  the  context  of  what 
was  known  as  Track  II — a  covert  action  program,  undertaken  by  the 
CIA  at  the  direction  of  President  Nixon,  to  prevent  Salvador  Allende 
from  assuming  the  office  of  President  of  Chile.  During  the  assassina- 
tion inquiry,  the  Committee  heard  from  over  75  witnesses  during  60 
days  of  hearings. 

The  Committee  has  chosen  not  to  make  public  the  details  of  all  the 
covert  action  case  studies,  with  the  exceptions  noted  above.  The  force 
of  the  Committee's  recommendations  on  covert  action  might  be 
istrengthened  by  using  detailed  illustrations  of  what  the  United 
iStates  did  under  what  circumstances  and  with  what  results  in  country 
i"X"  or  "Y."  The  purpose  of  the  Committee  in  examining  these  cases, 
however,  was  to  understand  the  scope,  techniques,  utility,  and  pro- 
priety of  covert  action  in  order  to  make  recommendations  for  the 
future.  The  Committee  concluded  that  it  was  not  essential  to  expose 
past  covert  relationships  of  foreign  political,  labor  and  cultural  leaders 
with  the  United  States  Government  nor  to  violate  the  confidentiality 
of  these  relationships.  Therefore,  names  of  individuals  and  institu- 
tions have  been  omitted. 

In  addition,  the  Committee  decided,  following  objections  raised  by 
the  CIA,  not  to  publicly  release  two  sections  of  this  Report — "Tech- 
niques of  Covert  Action"  and  "Covert  Action  Projects:  Initiation, 
Review,  and  Approval."  These  two  sections  will  be  submitted  to  the 
Members  of  the  Senate  in  a  classified  form.  However,  for  a  discussion 
of  covert  action  techniques,  as  they  were  practiced  in  Chile,  see  the 
Connnittee  Staff  Report,  "Covert  Action  in  Chile:  1963-1973"  (pp. 
6-10,14-40). 

A.  Evolution  of  Covert  Action 

Covert  action  was  not  included  as  one  of  the  charter  missions  of  the 
CIA.  The  National  Security  Act  of  1947  (which  established  the 
Agency  and  the  National  Security  Coimcil)  does  not  specifically  men- 
tion or  authorize  secret  operations  of  any  kind,  whether  for  intelligence 
collection  or  covert  action.^  The  1947  Act  does,  however,  contain  a 
provision  which  directs  the  CIA  to  "perform  such  other  functions  and 
duties  related  to  intelligence  affecting  the  national  security  as  the 


*  Senate  Select  Committee,  Hearings,  12/4-5/75,  Vol.  7. 

^  See  Appendix  I,  "Congressional  Authority  for  the  CIA  to  Conduct  Covert 
Actions." 


144 

National  Security  Council  may  from  time  to  time  direct."  ^  One  of  the 
drafters  of  the  1947  Act,  former  Secretary  of  Defense  Clark  Clifford, 
has  referred  to  this  provision  as  the  "catch-all"  clause.  According  to 
Mr.  Clifford: 

Because  those  of  us  who  were  assigned  to  this  task  and  had 
the  drafting  responsibility  were  dealing  with  a  new  subject 
with  practically  no  precedents,  it  was  decided  that  the  Act 
creating  the  Central  Intelligence  Agency  should  contain  a 
"catch-all"  clause  to  provide  for  unforeseen  contingencies. 
Thus,  it  was  written  that  the  CIA  should  "perform  such  other 
functions  and  duties  related  to  intelligence  aftecting  the  na- 
tional security  as  the  National  Security  Council  may  from 
time  to  time  direct."  It  was  under  this  clause  that,  early  in  the 
operation  of  the  1947  Act,  covert  activities  were  authorized. 
I  recall  that  such  activities  took  place  in  1948  and  it  is  even 
possible  that  some  planning  took  place  in  late  1947.  It  was 
the  original  concept  that  covert  activities  undei-taken  under 
the  Act  were  to  be  carefully  limited  and  controlled.  You  will 
note  that  the  language  of  the  Act  provides  that  this  catch- 
all clause  is  applicable  only  in  the  event  that  the  national 
security  is  affected.  This  was  considered  to  be  an  important 
limiting  and  restricting  clause.' 

Beginning  in  December  1947,  the  National  Security  Council  issued 
a  series  of  classified  directives  specifying  and  expanding  the  CIA's 
covert  mission.^  The  first  of  these  directives,  NSC-4-A,  authorized  the 
Director  of  Central  Intelligence  (DCI)  to  conduct  coveit  psycho- 
logical operations  consistent  with  United  States  policy  and  in  coordi- 
nation with  the  Departments  of  State  and  Defense. 

A  later  directive,  NSC  10/2,  authorized  the  CIA  to  conduct  covert 
political  and  paramilitary  operations.  To  organize  and  direct  these 
activities,  a  semi-independent  Office  of  Policy  Coordination  (OPC) 
was  established  within  the  CIA.  OPC  took  policy  direction  from  the 
Departments  of  State  and  Defense.^  The  directive  establishing  OPC 
referred  to  the  "vicious  covert  activities  of  the  U.S.S.R."  and  author- 
ized the  OPC  to  plan  and  conduct  covert  operations,  including  covert 
political,  psychological,  and  economic  warfare.  These  early  activities 
were  directed  against  the  Soviet  threat.  They  included  countering 
Soviet  propaganda  and  covert  Soviet  support  of  labor  unions  and 
student  groups  in  Western  Europe,  direct  U.S.  support  of  foreign 
political  pai'ties,  "economic  warfare,"  sabotage,  assistance  to  refugee 
liberation  groups,  and  support  of  anti-Comnnniist  groups  in  occupied 
or  threatened  areas. 

Until  a  reorganization  in  June,  1950,  OPC's  responsibilities  for 
paramilitary  action  were  limited,  at  least  in  theory,  to  contingency 
planning.  Networks  of  agents  Avere  trained  to  assist  the  escape  of  re- 

'50  U.S.C.  403(d)(5). 

'  Clifford,  12/5/75,  Hearings,  pp.  50-51. 

*For  a  full  discussion  of  tlie  National  Security  Council  and  its  direction  of 
intelligence  activities,  see  Chapter  IV.  "The  President's  Office." 

"The  semi-independent  status  of  OPC  within  the  CIA  created  a  rivalry  with 
the  exi.sting  CIA  component  responsible  for  clandestine  intelligence,  the  Office  of 
►Strategic  Operations. 


145 

sistance  forces  and  carry  out  sabotage  behind  enemy  lines  in  the  event 
of  war.  However,  OPC  did  conduct  some  guerrilla-type  operations  in 
this  early  period  against  Soviet  bloc  countries,  using  neighboring 
countries  as  bases  and  employing  a  variety  of  "black"  activities.^" 

The  size  and  activities  of  the  OPC  grew  dramatically.  Many  covert 
action  programs  initiated  in  the  first  few  yeai"S  as  an  adjunct  to  the 
Unitetl  States  ix)licy  of  communist  containment  in  Europe  ev^entually 
developed  into  large-scale  and  long-term  operations,  such  as  the 
clandestine  propaganda  radios  aimed  at  the  So\'iet  bloc — Radio  Free 
Eui'ope  and  Radio  Liberty. 

Many  early  OPC  activities  involved  subsidies  to  European  "counter- 
front"'  labor  and  political  organizations.  These  were  intended  to  serve 
as  alternatives  to  Soviet-  or  communist-inspired  groups.  Extensive 
OPC  lalx>r,  media,  and  election  operations  in  Western  Europe  in  the 
late  1940's,  for  insitance,  were  designed  to  luidercut  debilitating  strikes 
by  conmiiHiist  trade  unions  and  election  advances  by  communist  par- 
ties. Support  for  "counterfront"'  organizations,  especially  in  the  areas 
of  student,  labor  and  cultural  activities,  was  to  become  nuich  more 
prevalent  in  the  1950s  and  1960s,  although  they  later  l^ecame  inter- 
national rather  than  European-oriented. 

Communist  aggression  in  the  Far  p]ast  led  the  United  States  into 
war  in  Korea  in  June  1950.  At  the  same  time,  Defense  Department 
pressure  shifted  the  focus  of  OPC  activities  toward  more  aggressive 
responses  to  Soviet  and  Chinese  Communist  threats,  particularly  mili- 
tary incursions.  Large  amounts  of  money  were  spent  for  guerrilla  and 
propaganda  operations.  These  ojierations  were  designed  to  support 
the  ITnited  States  military  mission  in  Korea.  Most  of  these  diversionary 
paramilitaiy  operations  never  came  to  fruition.  For  example,  during 
this  period  the  CIA's  Office  of  Procurement  acquired  some  $152  million 
worth  of  foreign  weapons  and  ammunition  for  use  by  guerrilla  forces 
that  never  came  into  existence. 

As  a  result  of  the  upsurge  of  paramilitary  action  and  contingency 
l)lanning,  OPC's  manpower  almost  trebled  during  the  first  year  of 
the  Korean  War.  A  large  part  of  this  increase  consisted  of  paramilitary 
experts,  who  were  later  to  be  instrumental  in  CIA  paramilitary  opera- 
tions in  the  Ray  of  Pigs,  the  Congo,  and  Laos,  among  others.  In  support 
of  paramilitary  activities  the  CIA  had  bases  and  facilities  in  the 
T 'nited  States,  Europe,  the  Mediterranean  and  the  Pacific.  OPC's  in- 
creased activity  was  not  limited  to  paramilitary  operations,  however. 
Py  1958,  there  were  major  covert  o])erations  in  48  countries,  consist- 
ing primarily  of  propaganda  and  ])olitical  action. 

Another  event  in  1950  affected  the  develoimient  and  organizational 
framework  for  covert  action.  General  Walter  Bedell  Smith  became 
CIA  Director.  He  decided  to  merge  OPC  with  the  CIA's  Office  of 
Special  Operations."  Although  the  merger  was  not  completed  until 

^"  "Black"  activities  are  (hose  intended  to  give  tlie  impression  tliat  tliey  are 
sponsored  by  an  indigenous  opposition  force  or  a  hostile  power,  rather  than  by 
the  United  States. 

"  Tn  order  to  accomplisli  the  merger.  Smith  first  consolidated  the  OPC  chain 
of  command  by  ordering  the  Director  of  OPC  to  report  directly  to  the  DCI  instead 
of  through  the  Departments  of  State  and  Defense.  Smith  also  appointed  his  own 
senior  representatives  to  field  stations  to  coordinate  the  covert  activities  of  the 
OPC  and  the  espionage  operations  of  the  OSO.  The  two  offices  were  often  com- 
peting for  the  same  potential  a.ssetsin  foreign  countries. 


146 

1954,  the  most  important  organizational  step  took  place  in  August 
1952 — a  single  new  directorate,  entirely  within  the  structure  and  con- 
trol of  the  CIA,  was  established.  Known  as  the  Directorate  for  Plans 
(DDP),^-  this  new  directorate  was  headed  by  a  Deputy  Director  and 
was  assigned  responsibility  for  all  CIA  covert  action  and  espionage 
functions.  The  CIA's  "Clandestine  Service"  was  now  in  place. 

By  the  time  the  DDP  iwas  organized,  OPC  had  a  large  staff 
and  an  annual  budget  of  almost  $20U  million.  It  dominated  the  smaller 
and  bureaucratically  weaker  OSO  in  size,  glamour,  and  attention.  Yet, 
one  of  the  original  purposes  of  the  merger,  according  to  General  Smith, 
was  to  protect  the  OSO  function  of  clandestine  intelligence  collection 
from  becoming  subordinate  to  the  covert  action  function  of  OPC.  In 
1952,  Smith  wrote  that  the  merger  was : 

designed  to  create  a  single  overseas  clandestine  service,  while 
at  the  same  time  preserving  the  integrity  of  the  long-range 
espionage  and  counterespionage  mission  of  the  CIA  from 
amalgamation  into  those  clandestine  activities  which  are  sub- 
ject to  short-term  variations  in  the  prosecution  of  the  Cold 
War. 

Despite  Smith's  desires,  the  Cold  War,  and  the  "hot  war"  in  Korea, 
increased  the  standing,  and  influence,  of  the  covert  "operators"  within 
the  CIA.  This  trend  continued  throughout  the  1950s  and  1960s. 

The  post-Korean  War  period  did  not  see  a  reduction  in  CIA  covert 
activities.  Indeed,  the  communist  threat  was  now  seen  to  be  world- 
wide, rather  than  concentrated  on  the  borders  of  the  Soviet  Union 
and  mainland  China.  In  response,  the  CIA,  at  the  direction  of  the 
National  Security  Council,  expanded  its  European  and  crisis-oriented 
approach  into  a  world-wide  effort  to  anticipate  and  meet  communist 
aggression,  often  with  techniques  equal  to  those  of  the  Soviet  clandes- 
tine services.  This  new  world-wide  approach  was  reflected  in  a  1955 
Xational  Security  Council  Directive  which  authorized  the  CIA  to : 

— Create  and  exploit  problems  for  International  Commu- 
nism; 

— Discredit  International  Communism,  and  reduce  the 
strength  of  its  parties  and  organization  ; 

— Reduce  International  Communist  control  over  any  areas 
of  the  world. 

The  1950s  saw  an  expansion  of  communist  interest  in  the  Third 
World.  Attempts  to  anticipate  and  meet  the  communist  threat  there 
proved  to  be  an  easier  task  than  carrying  out  clandestine  activities 
in  the  closed  Soviet  and  Chinese  societies.  Political  action  projects  in 
the  Third  World  increased  dramatically.  Financial  support  was  pro- 
vided to  parties,  candidates,  and  incumbent  leaders  of  almost  every 
political  persuasion,  except  the  extreme  left  and  right.  The  immediate 
purpose  of  these  projects  was  to  encourage  political  stability,  and  thus 
jH-eyent  Communist  incursions;  but  another  important  objective  of 
political  action  was  the  acquisition  of  "agents  of  influence"  who  could 
be  used  at  a  future  date  to  provide  intelligence  or  to  carry  out  political 
action.  Through  such  projects,  the  (^lA  developed  a  world-wide  in- 

"The  name  was  changed  to  the  Directorate  for  Operations  (DDO)  in  1073. 


147 

f  rastructiire  of  individual  agents,  or  networks  of  agents,  engaged  in  a 
variety  of  covert  activities. 

By  1955,  the  CIA's  Clandestine  Service  bad  gone  through  a  number 
of  reorganizations.  It  emerged  with  a  structure  for  the  support  of 
covert  action  that  remained  essentially  the  same  until  the  early  1960s. 
The  Clandestine  Service  consisted  of  seven  geographic  divisions  and  a 
number  of  functional  staffs — foreign  intelligence,  counterintelligence, 
iechnical  support  for  covert  action,  and  planning  and  program  co- 
ordination. With  the  demise  of  paramilitary  activities  following  the 
Korean  War,  the  Paramilitary  Operations  Staff  had  been  abolished 
and  its  functions  merged  with  the  staff  responsible  for  ])sychologica] 
action.  An  International  Organizations  Division,  created  in  June  1954, 
handled  all  programs  in  support  of  labor,  youth,  student,  and  cultural 
counterfront  organizations. 

ITsing  the  covert  action  budget  as  one  measure  of  activity,  the  scope 
of  political  and  ?:)sychological  action  during  the  1950s  was  greatest 
in  the  Far  East,  Western  Europe,  and  the  Middle  East,  with  steadily 
increasing  activity  in  the  Western  Hemisphere.  The  inteniational 
labor,  student,  and  media  projects  of  the  International  Organizations 
Division  constituted  the  greatest  single  concentration  of  covert  political 
and  propaganda  activities.  Paramilitary  action  began  to  increase  again 
in  the  late  1950s  with  large-scale  operations  in  two  Asian  countries 
and  increased  covert  military  assistance  to  a  third." 

The  Bay  of  Pigs  disaster  in  1961  prompted  a  reorganization  of  CIA 
covert  action  and  the  procedures  governing  it.  A  new  form  of  covert 
action — counterinsurgency — was  now  emphasized.  Tender  the  direction 
of  the  National  Security  Council,  the  CIA  rapidly  expanded  its  coun- 
terinsurgency capability,  focusing  on  Latin  America,  Africa,  and  the 
Far  East.  After  the  Geneva  agreements  of  1962,  the  CIA  took  oyer  the 
training  and  advising  of  the  Meo  army,  previously  a  responsibility  of 
I^.S.  military  advisers.  The  Laos  operation  eventually  became  the  larg- 
est paramilitary  effort  in  post-war  history.  In  1962  the  Agency  also 
began  a  small  paramilitary  program  in  Vietnam.  Even  after  the 
Ignited  States  Military  Assistance  Command  (MxVCV)  took  over 
paramilitary  programs  in  Vietnam  at  the  end  of  1963,  the  CIA  con- 
tinued to  assist  the  U.S.  military's  covert  activities  against  North 
Vietnam. 

The  CIA's  paramilitary  effort  continued  to  expand  throughout  the 
decade.  The  paramilitary  budget  reached  an  all-time  hich  in  1970.  It 
probably  Avould  have  continued  to  climb,  had  not  the  burden  of  the 
Laos  proirram  been  transferred  to  the  Department  of  Defense  in 
1971.^* 


"  In  1062  a  paramilitary  office  was  reconstituterl  in  the  CTA.  Following  the 
Ray  of  Pies,  a  panel  headed  by  Lvnian  Kirkpatriek.  then  the  CTA's  Executive 
Director-Comptroller,  recommended  that  an  office  be  created  in  the  Clandestine 
Sprvice  to  centralize  and  professionalize  paramilitary  action  and  contingency 
i^'anning,  dramng  upon  Agency-wide  resources  for  larsre-scale  operations.  As  a 
result,  a  new  paramilitary  division  was  establishe<l.  It  was  to  operate  under  the 
gnidonce  of  a  new  NSC  approval  jarrouip — the  Snecial  Groun  (Counterinsurgency). 

"Part  of  the  Agency's  interest  in  naramilitary  activities  stemmed  from  the 
Agencv's  view  that  these  activities  are  interdenendent  with  intelligence  collec- 
tion functions.  DCI  .John  McCone  protested  the  transfer  of  paramilitary  pro- 
grams in  Vietnam  to  MACV  in  196.S-1964  because  he  thought  that  a  third  of  the 
intelligence  reporting  of  the  CIA's  Vietnam  station  might  be  lost  with  such  a  re- 
duction of  CIA  participation. 


148 

Paramilitary  action  was  but  one  of  the  CIA's  collection  of  tools 
dnrino-  the  early  and  middle  1960s.  Outside  the  Far  East  the  CIA 
mounted  an  increasino-  number  of  political,  ])ropa<janda,  and  economic 
projects.  This  was  the  era  of  Operation  MONGOOSE,  a  massive  covert 
assault  on  the  Castro  reoime  in  Cuba.^'>  The  need  to  combat  the  "export 
of  revolution"  by  connnunist  powers  stinndated  a  variety  of  new 
covert  techniques  aimed  at  an  increasinoly  broad  range  of  "targets." 
Coveit  action  reached  its  peak  in  the  years  1964  to  1967. 

In  contrast  to  the  period  1964  to  1967,  when  expenditures  for  polit- 
ical and  propaganda  action  increased  almost  60  percent,  the  period 
1968  to  the  present  has  registered  declines  in  every  functional  and  geo- 
graphic category  of  covert  action — except  for  paramilitary  operations 
in  the  Far  East  which  did  not  drop  until  197^.  The  number  of  individ- 
ual covert  action  projects  dropped  by  50  i:)ercent  from  fiscal  year  1964 
(when  they  reached  an  all-time  high)  to  fiscal  year  1968.  The  number 
of  projects  by  itself  is  not  an  adequate  measure  of  the  scope  of  covert 
action.  Projects  can  vary  considerably  in  size,  cost,  duration,  and  effect. 
Today,  for  example,  one-fourth  of  the  current  covert  action  projects 
are  relatively  high-cost  (over  $100,000  annually). 

No  matter  which  standards  are  used,  covert  activities  have  decreased 
considerably  since  their  peak  period  in  the  mid-  and  late  1960s.  Re- 
cent trends  reflect  this  deciease  in  covert  action.  In  one  country,  covert 
activities  began  in  the  early  years  of  the  OPC  and  became  so  extensive 
in  the  1950s  and  1960s  that  they  affected  almost  every  element  of  that 
society.  A  retrenchment  began  in  1965;  by  1974  there  were  only  two 
relatively  small-scale  political  action  projects.  The  only  covert,  expendi- 
ture projected  for  fiscal  year  1976  is  a  small  sum  for  the  development 
of  potential  "assets"  or  local  agents  who  may  be  used  for  covert  action 
in  the  future.  In  a  second  country,  covert  action  expenditures  in 
1975  were  less  than  one  pei'cent  of  the  total  in  1971.  A  slight  in- 
crease was  projected  for  fiscal  yeai'  1976,  also  for  the  development  of 
potential  assets  for  future  use.  The  CIA  lias  thus  curtailed  its  covert 
action  projects  in  these  two  countries,  although  its  current  investment 
in  potential  assets  indicates  that  the  Agency  does  not  want  to  preclude 
the  possibility  of  covert  involvement  in  the  future. 

Some  of  the  major  reasons  for  the  decline  of  covert  activities  since 
the  mid-  and  late  1960s  include  : 

— a  reduction  of  CIA  labor,  student,  and  media  projects 
following  the  1967  Ramparfs  disclosure  and  the  subsequent 
recommendations  of  the  Katzenbach  Committee; 

— the  transfer  of  covert  military  assistance  in  Laos  from 
the  CIA  budget  to  tlie  Defense  Department  budget  in  1971, 
and  the  termination  of  many  other  covert  activities  in  that 
area  with  the  end  of  the  war  in  Indochina  in  1975 ; 

— reductions  in  overseas  personnel  of  the  Clandestine  Serv- 
ice as  a  result  of  studies  and  cuts  made  by  James  Schlesinger, 
first  when  he  was  with  the  Office  of  Management  and  Budget 
and  later  durinc:  his  brief  tenure  as  Director  of  Central  In- 
telligence in  1978; 


"  Senate  Select  Committee,   "Alleged  Assassination  Plots   Involving  Foreign 
Leaders,"  p.  139  ff. 


149 

— sliiftin<r  XLS.  foreign  jxilicy  priorities  in  the  1970s, 
which  liave  de-eniphasized  sustained  involvement  in  the  in- 
ternal affairs  of  other  nations;  and 

— concern  ainono-  Aoency  officials  and  U.S.  policymakers 
that  publicity  given  to  CIA  covert  activities  would  increase 
the  chances  of  disclosure  and  generally  decrease  the  chances 
of  success  of  the  kinds  of  large-scale,  high-expenditure  proj- 
ects that  developed  in  the  1060s.^'"^ 

B.    CoXGRESSIOXAL    OVERSIGHT 

There  is  no  reference  to  covert  action  in  the  1947  National  Security 
Act,  nor  is  there  any  evidence  in  the  debates,  connnittee  reports,  or 
legislative  history  of  the  1947  Act  to  show  that  Congress  intended 
specifically  to  authorize  covert  operations.^^  Since  the  CIA's  wartime 
predecessor,  the  Office  of  Strategic  Services,  had  conducted  covert 
operations.  Congress  may  have  anticipated  that  these  operations  were 
envisioned. 

AVhether  specifically  authorized  by  Congress  or  not,  CIA  covert  op- 
erations were  soon  underway.  Citing  the  "such  other  functions  and 
duties"  clause  of  the  1947  Act  as  authority,  the  National  Security 
Council  authorized  the  CIA  to  undertake  covert  operations  at  its  first 
meeting  in  Deceuiber  1947.  At  that  point  Congress  became  responsible 
for  overseeing  these  activities. 

ShoKly  after  the  passage  of  the  1947  Act,  the  Armed  Services  and 
Appropriations  Committees  of  the  House  and  the  Senate  assumed 
jurisdiction  for  CIA  activities  and  appropriations.  In  the  Senate,  fol- 
lowing an  infoimal  arrangement  worked  out  with  Senators  Vanden- 
berg  and  Russell,  small  CIA  subcommittees  were  created  within 
Armed  Ser\'ices  and  Appropriations.  Over  time,  the  relations  between 
the  subconnnittees  and  the  CIA  came  to  be  dominated  by  two  prin- 
ciples: "need  to  know"  and  "want  to  know."  ^'  The  "want  to  know" 
principle  was  best  expressed  in  a  statement  made  in  1956  by  a  con- 
gressional overseer  of  the  CIA,  Senator  Leverett  Saltonstall : 

It  is  not  a  question  of  reluctance  on  the  part  of  CIA  officials 
to  speak  to  us.  Instead,  it  is  a  questicm  of  our  reluctance,  if 
you  will,  to  seek  information  and  knowledge  on  subjects 
which  I  personally,  as  a  member  of  Congress  and  as  a  citizen, 
would  rather  not  have,  unless  I  believed  it  to  be  my  responsi- 
bility to  have  it  because  it  might  involve  the  lives  of  Ameri- 
can citizens.^® 


^'^  The  next  two  sections  of  this  report  "Covert  Action  Techniqnes"  and  "Covert 
Action  Projects :  Initiation,  Review,  and  Approval."  remain  classified  after  con- 
sultation between  the  Committee  and  the  executive  branch.  See  p.  143. 

^^  For  a  full  discussion  of  the  statutory  authority  for  CIA  activities,  and  con- 
.Jiressional  authorizition  of  covert  action,  see  Chapter  A' II  and  Appendix  I. 

"  The  Rockefeller  Commission  made  a  similar  point  in  its  Report : 

"In  sum,  congressional  oversight  of  the  CIA  has  been  curtailed  by  the  secrecy 
shrouding  its  activities  and  budget.  At  least  until  quite  recently,  Congress  has  not 
sought  substantial  amounts  of  information.  Correspondingly,  the  CIA  has  not 
generally  volunteered  additional  information."  (Report  of  the  Commission  on  CIA 
Activities  Within  the  United  States,  6/6/75,  p.  77.) 

"  Congressional  Record— April  9.  1956,  p.  S..'>292. 


150 

From  tlie  beginning,  the  House  and  the  Senate  subcommittees  were 
relatively  inactive.  According  to  information  available  to  the  Select 
Committee,  the  Senate  Armed  Services  subcommittee  met  26  times  be- 
tween January  1966  and  December  1975.  The  subcommittee  met  five 
times  in  1975,  twice  in  1974,  once  in  1978  and  1972,  and  not  at  all  in 
1971. 

Relations  between  the  CIA  and  the  subcommittees  came  to  be  de- 
termined, in  large  part,  by  the  personal  relationship  between  the  chair- 
men and  the  CIA  Director,  often  to  the  exclusion  of  other  subcom- 
mittee members.  Staff  assistance  was  minimal,  usually  consisting  of  no 
more  than  one  professional  stalf  mend)er. 

The  two  Senate  subcommittees  had  somewhat  different  responsibili- 
ties.^'* The  Appropriations  subconmiittee  was  to  concentrate  on  the 
budgetary  aspects  of  CIA  activities.  The  Armed  Services  subcommit- 
tee had  the  narrower  responsibility  of  determining  the  legislative 
needs  of  the  Agency  and  recommending  additional  or  corrective  leg- 
islation. It  did  not  authorize  the  CIA's  annual  budget. 

The  CIA  subcommittees  received  general  information  about  some 
covert  operations.  Prior  to  the  Hughes-Ryan  Amendment  to  the  1974 
Foreign  Assistance  Act,  hoAvever,  the  subcommittees  were  not  notified 
of  these  operations  on  any  regular  l)asis.  Notifications  occurred  on  the 
basis  of  informal  agreements  between  the  CIA  and  the  subcommittee 
chairmen.^°  CIA  covert  action  briefings  did  not  include  detailed  de- 
scriptions of  the  methods  and  cost  of  individual  covert  action  projects. 
Rather,  projects  were  grouped  into  broad,  general  programs,  either  on 
a  country-wide  basis  or  by  type  of  activity,  for  presentation  to  the  sub- 
committees. 

Chile  can  serve  as  an  example  of  how  oversight  of  covert  action  was 
conducted.  According  to  CIA  records,  there  was  a  total  of  58  congres- 
sional briefings  on  Chile  by  the  CIA  between  April  1964  and  Decem- 
ber 1974.  At  88  of  these  meetings  there  was  some  discussion  of  covert 
action;  special  releases  of  funds  for  covert  action  from  the  Contin- 
gency Reserve  were  discussed  at  28  of  them.  Of  the  88  covert  action 
briefings.  20  took  place  prior  to  1978,  and  18  took  place  after.-^ 

Of  the  38  covert  action  projects  undertaken  in  Chile  between  1963 
and  1974  with  40  Committee  approval.  Congress  was  briefed  in  some 
fashion  on  eight.  Presumably  the  25  others  were  undertaken  without 
congressional  consultation.^^  Of  the  more  than  $18  million  spent 
in  Chile  on  covert  action  projects  between  1963  and  1974,  Congress 

"  Initially  the  Armed  Services  and  Appropriations  subcommittees  met  separ- 
ately. However,  in  the  1960s,  because  of  overlapping  membership  tlie  two  com- 
mittees met  jointly.  For  several  years  Senator  Richard  Russell  was  chairman 
of  both  subcommittees. 

-°In  1967,  the  House  and  Senate  CIA  appropriations  subcommittees  began 
receiving  notifications  of  withdrawals  from  tlie  CIA's  Contingency  Reserve  Fund 
within  48  hours  of  the  release.  In  1975  the  two  Armed  Service  subcommittees 
began  receiving  tlie  same  notifications,  at  the  initiative  of  Director  Colby. 

"^The  13  J)riefings  which  occurred  after  1978  (March  1973  to  December  1974) 
included  meetings  with  the  Senate  Foreign  Relations  Subcommittee  on  Multi- 
national Corporations  and  the  House  Foreign  Affairs  Subcommittee  on  Inter- 
American  Affairs.  All  these  meetings  were  concerned  with  past  CIA  covert  action 
in  Chile. 

-  Among  the  2.5  projects  were  a  .$1.2  million  authorization  in  1971.  half  of 
which  was  spent  to  purchase  radio  stations  and  newspapers  while  the  other  half 
went  to  support  municipal  candidates  in  anti-Allende  political  parties :  and  an 
additional  expenditure  of  $815,000  in  late  1971  to  provide  support  to  opposition 
political  parties  in  Chile. 


151 

received  briefings  (sometimes  before  and  sometimes  after  the  fact)  on 
projects  totaling  about  $9.3  million.  Further,  congressional  oversight 
committees  were  not  consulted  about  projects  which  were  not  reviewed 
by  the  full  40  Connnittee.  One  of  these  was  the  Track  II  attempt  by 
the  CIA,  at  the  instruction  of  President  Nixon,  to  prevent  Salvador 
Allende  from  taking  office  in  1970."^ 

Congressional  oversight  of  CIA  covert  operations  was  altered  as 
a  result  of  the  Hughes-Eyan  amendment  to  the  1974  Foreign  Assist- 
ance Act.  That  amendment  stated : 

Sec.  662.  Limitation  on  Intelligence  Activities. —  (a)  No 
funds  appropriated  under  the  authority  of  this  or  any  other 
Act  may  be  expended  by  or  on  behalf  of  the  Central  Intelli- 
gence Agency  for  operations  in  foreign  countries,  other  than 
activities  intended  solely  for  obtaining  necessary  intelligence, 
unless  and  until  the  President  finds  that  each  such  operation 
is  important  to  the  national  security  of  the  United  States  and 
reports,  in  a  timely  fashion,  a  description  and  scope  of  such 
operation  to  the  appropriate  committees  of  the  Congress,  in- 
cluding the  Committee  on  P'oreign  Relations  of  the  United 
States  Senate  and  the  Committee  on  Foreign  Affairs  of  the 
United  States  House  of  Representatives.^* 

The  Hughes-Ryan  amendment  had  two  results.  First,  it  established 
hy  statute  a  reporting  requirement  to  Congress  on  covert  action.  Sec- 
ond, the  amendment  increased  the  nmiiber  of  connnittees  that  would  be 
informed  of  approved  covert  operations.  The  inclusion  of  the  Senate 
Foreign  Relations  Committee  and  the  House  International  Relations 
Connnittee  was  in  recognition  of  the  significant  foreign  policy  impli- 
cations of  covert  operations. 

Despite  these  changes,  the  oversight  role  of  Congress  with  respect  to 
covert  operations  is  still  limited.  The  law  does  not  require  notification 
of  Congress  before  covert  operations  are  implemented.  The  DCI  has 
not  felt  obligated  to  inform  the  subcommittees  of  approved  covert 
action  operations  prior  to  their  implementation,  although  in  some  cases 
he  has  done  so.  Problems  thus  arise  if  members  of  Congress  object  to  a 
decision  by  the  President  to  undertake  a  covert  operation. 

The  recent  case  of  Angola  is  a  good  example  of  the  weaknesses  of 
the  Hughes-Ryan  amendment.  In  this  case,  the  Executive  fully  com- 
plied with  the  requirements  of  the  amendment.  In  January  1975  the 
administration  decided  to  provide  substantial  covert  political  sup- 
port to  the  FNLA  faction  in  Angola.^^  In  early  February,  senior  mem- 

'^  With  respect  to  congressional  oversight  of  CIA  activities  in  Chile,  the  Com- 
mittee's Staff  report  on  "Covert  Action  in  Chile"  concluded  : 

"Between  April  1964  and  December  1974,  CIA's  consultation  with  its  congres- 
sional oversight  committees — and  thus  Congress'  exercise  of  its  oversight  func- 
tion— was  inadequate.  The  CIA  did  not  volunteer  detailed  information;  Congress 
most  often  did  not  seek  it."  (Senate  Select  Committee,  "Covert  Action  in  Chile," 
p.  49.) 

=^22  use  2422. 

"'^  There  were  three  factions  involved  in  the  Angolan  conflict :  the  National 
Front  for  the  Liberation  of  Angola  (FNLA),  led  by  Holden  Roberto  ;  the  National 
Union  for  the  Total  Independence  of  Angola  (UNITA),  led  by  .Jonas  Savimbi ; 
and  the  Popular  Movement  for  the  Liberation  of  Angola,  (MPLA)  led  by  Agos- 
tinho  Neto.  The  latter  group  received  military  and  political  support  fnmi  the 
Soviet  Union  and  Cuba. 


152 

bers  of  the  six  congressional  committees  received  notification  of  this 
decision. 

In  late  July  the  40  Committee  and  President  Ford  approved 
an  additional  expenditure  to  pi'ovide  covert  military  assistance  to 
the  FNLA  and  a  second  Angolan  faction,  UNITA.  Again  senior 
members  of  the  six  committees  were  notified.  The  Chairman,  the 
ranking  minority  member,  and  Chief  of  Staff  of  the  Senate  Foreign 
Relations  Committee  were  briefed  in  late  Jnly.  Under  procedures  es- 
tablished within  that  connnittee,  a  notice  of  the  CIA  briefing  w\as  cir- 
culated to  all  conmiittee  members.  When  Senator  Dick  Clark,  Chair- 
man of  the  Foreign  Relations  Subcommittee  on  African  Afi^airs, 
learned  that  the  covert  action  program  was  in  Africa,  he  requested 
further  details.  On  July  28,  Clark's  subcouunittee  was  briefed  on  the 
paramilitary  assistance  progi-am  to  tlie  FNLA  and,  apparently,  some 
meml)ers  of  the  subcommittee  objected. 

In  early  September  the  Administration  decided  to  increase  its  covert 
military  assistance  to  Angola  by  $10.7  million,  bringing  the  total 
amount  to  $25  million.  Again,  the  required  notifications  were  carried 
out.2« 

In  early  November,  Senator  Clark  raised  his  objections  to  the 
Angola  operation  before  the  full  Senate  Foreign  Relations  Connnittee. 
The  Committee  in  turn  asked  Director  Colby  and  Secretary  Kissinger 
to  testify,  in  closed  session,  on  U.S.  involvement  in  Angola.  At  this 
meeting,  several  members  of  the  Committee  expressed  their  concern 
for  the  program  to  Director  Colby  and  Undersecretary  Joseph  Sisco, 
who  represented  the  State  Department  in  Secretary  Kissinger's 
absence.  Despite  tliis  concern,  in  mid-November  President  Foi'd  and 
the  40  Conmiittee  authorized  the  expenditure  of  another  $7  million  for 
covert  military  assistance  to  Angola.  In  early  December,  the  con- 
gressional committees  were  notified  of  this  new  infusion  of  military 
assistance. 

Finding  opposition  within  the  briefing  mechanism  ineffective.  Sena- 
tor Clark  proposed  an  amendment  to  a  pending  military  and  security 
assistance  bill.  In  January  197(^  after  a  conq:)licated  series  of  legislative 
actions,  additional  covert  military  assistance  to  Angola  was  prohibited 
by  (^ongress  by  an  amendment  to  the  Defense  appropriations  bill. 

The  dispute  over  Angola  illustrates  the  dilemma  Congress  faces  with 
respect  to  covert  operations.  The  Hughes-Ryan  amendment  guar- 
anteed information  about  covert  action  in  Angola,  but  not  any  control 
over  this  controversial  instrument  of  foreign  policy.  Congress  had  to 
resort  to  the  power  of  the  purse  to  express  its  judgment  and  will. 

C.  Findings  anu  Conclusions '''''' 

Coveit  action  has  been  a  tool  of  United  States  foreign  policy 
for    the    past    28    yeai's.     Thousands    of    covert    action     projects 

■■"'  On  September  2.5,  1975  the  New  York  TlmcH  first  reported  tlie  fact  of  U.S. 
covert  assistance  to  the  FNLA  and  UNITA.  The  article  stated  that  Director  Colby 
had  notified  Congress  of  the  Angola  operation  in  accordance  with  the  Hughes- 
Ryan  amendment,  but  "no  serious  objections  were  raised."  There  was  little 
reaction  to  the  Times  article,  either  in  Congress  or  by  the  public. 

''"'  See  Appendix  II  which  presents  summaries  of  recommendations  regarding 
covert  action  made  to  the  Senate  Select  Committee  during  the  course  of  its 
investigation. 


153 

have  been  undertaken.  An  extensive  record  has  been  established  on 
which  to  base  judgments  o,f  whether  covert  action  should  have  a 
role  in  the  foreign  policy  of  a  democratic  society  and,  if  so,  under 
Avhat  restraints  of  accountability  and  control.  The  Committee's  ex- 
amination of  covert  action  has  led  to  the  following  findings  and 
conclusions. 

1.  The  Use  of  Covert  Action 

Although  not  a  specific  charter  mission  of  the  Central  Intelligence 
Agency,  covert  action  quickly  became  a  primary  activity.  Covert 
action  projects  were  first  designed  to  counter  the  Soviet  threat  in 
P^urope  and  were,  at  least  initially,  a  limited  and  ad  hoc  response 
to  an  exceptional  threat  to  American  security.  Covert  action  soon 
became  a  routine  program  of  influencing  governments  and  covertly  ex- 
ercising power — involving  literally  hundreds  of  projects  each  year. 
By  1953  there  were  major  covert  operations  underway  in  48  coun- 
tries, consisting  of  propaganda,  paramilitary  and  political  action 
projects.  By  the  1960s,  covert  action  had  come  to  mean  "any  clandes- 
tine activity  designed  to  influence  foreign  governments,  events,  orga- 
nizations or  persons  in  support  of  Ignited  States  forpign  policy."  Sev- 
eral thousand  individual  covert  action  projects  have  been  undertaken 
since  1961,  although  the  majority  of  these  have  been  low-risk,  low-cost 
projects,  such  as  a  routine  press  placement  or  the  development  of  an 
"agent  of  influence." 

That  covert  action  was  not  intended  to  become  a  pervasive  foreign 
policy  tool  is  evident  in  the  testimony  of  those  who  were  involved  in 
the  drafting  of  the  1947  National  Security  Act.  One  of  these  drafters, 
Clark  Clifford,  had  this  to  say  about  the  transition  of  covert  action 
from  an  ad  hoc  response  to  a  frequently  used  foreign  policy  tool: 

It  was  the  original  concept  that  covert  activities  under- 
taken under  the  Act  were  to  be  carefully  limited  and  con- 
trolled. You  will  note  that  the  language  of  the  Act  provides 
that  this  catch-all  clause  is  applicable  only  in  the  event  that 
national  security  is  affected.^*  This  was  considered  to  be  an 
important  limiting  and  restricting  clause. 

However,  as  the  Cold  War  continued  and  Communist  ag- 
gi-ession  became  the  major  problem  of  the  day,  our  Govern- 
ment felt  that  it  was  necessary  to  increase  our  country's  re- 
sponsibilities in  protecting  freedom  in  various  parts  of  the 
world.  It  seems  apparent  now  that  we  also  greatly  increased 
our  covert  activities.  I  have  read  somewhere  that  as  time 
progi-essed  we  had  literally  hundreds  of  such  operations 
going  on  simultaneously.  It  seems  clear  that  these  operations 
have  ffotten  out  of  hand.-^^ 


^The  CIA,  under  the  1947  Act,  is  directed  "to  perform  such  other  functions 
and  duties  related  to  intelligence  affecting  the  national  security  as  the  National 
Security  Council  may  from  time  to  time  direct." 

=^  Clifford,  12/5/7.5,  Hearings,  p.  .51. 


154 

"Z.  Covert  Action  ^''JSuccess'^''  and  '"' F ailuTe^'' 

The  record  of  covert  action  reviewed  by  the  Coimnittee  suggests  that 
net  judgments  as  to  "'success"  or  "failure"  are  difficult  to  draw.^*^  The 
Conunittee  has  found  that  when  covert  operations  have  been  consistent 
with,  and  in  tactical  support  of,  policies  which  have  emerged  from  a 
national  debate  and  the  established  processes  of  government,  these  op- 
erations liave  tended  to  be  a  success.  Covert  support  to  beleaguered 
democrats  in  Western  Europe  in  the  late  ID-lUs  was  in  support  of  an 
established  policy  based  on  a  strong  national  consensus.  On  the  other 
hand,  the  public  has  neither  miderstood  nor  accepted  the  coveit  harass- 
ment of  the  democratically  elected  Allende  government.  Kecent  covert 
intervention  in  Angola  preceded,  and  indeed  preempted,  public  and 
congressional  debate  on  America's  foreign  policy  interest  in  the  fu- 
ture of  Angola.  The  intervention  in  Angola  was  conducted  in  the 
absence  of  etforts  on  the  part  of  the  executive  branch  to  develop  a 
national  consensus  on  America's  interests  in  Southei'n  Africa, 

The  Conunittee  has  received  extensive  testimony  that  coveit  action 
can  be  a  success  when  the  objective  of  the  project  is  to  support  an  indi- 
vidual, a  party,  or  a  government  in  doing  what  that  individual,  party, 
or  govermnent  wants  to  do — and  when  it  has  the  will  and  capacity  to 
do  it.  Covert  action  cannot  build  political  institutions  where  there  is 
no  local  political  will  to  have  them.  Where  this  has  been  attempted, 
success  has  been  problematical  at  best,  and  the  risks  of  exposure 
enormously  high. 

The  Committee's  findings  on  paiamilitary  activities  suggest  that 
these  operations  are  an  anomaly,  if  not  an  aberration,  of  covert 
action.^^  Pai'amilitary  operations  are  among  the  most  costly  and 
controversial  forms  of  covert  action.  They  are  difficult,  if  not  impos- 
sible, to  conceal.  They  lie  in  the  critical  gray  area  between  limited 
influence,  short  of  the  use  of  force,  and  overt  military  intervention. 
As  such,  paramilitary  activities  are  especially  significant.  In  Viet- 
nam, paramilitary  strategy  formed  a  bridge  between  the  two  levels 
of  involvement.  Paramilitary  operations  have  great  potential  for 
escalating  into  major  military  commitments. 

Covert  U.S.  paramilitaiy  programs  have  generally  been  designed  to 
accomplish  one  of  the  following  objectives:  (1)  subversion  of  a  hos- 
tile government  (e.g.,  Cuba)  ;   {'!)  support  to  friendly  governments 

^Former  Attorney  General  and  Under  Secretary  of  State  Nicholas  Katzen- 
baeh  had  this  to  say  about  covert  action  "success"  and  "failure" : 

"I  start  from  the  premise  that  some  of  our  covert  activities  abroad  have  been 
successful,  valuable  in  support  of  a  foreign  policy  which  was  understood  and 
approved  by  the  electorate  and  Congress  ...  I  also  start  from  a  premise  that 
some  of  our  activities  abroad  have  not  been  successful,  and  have  been  wrong  and 
wrongheaded.  In  some  cases  we  have  grossly  over-estimated  our  capacity  to 
bring  about  a  desired  result  and  have  created  situations  unintended  and  un- 
desirable." (Nicholas  Katzenl)ach  testimony.  House  Select  Committee  on  In- 
telligence, 12/10/75,  Hearings,  Vol.  5,  p.  1797.) 

31  The  Committee  studied,  in  detail,  covert  military  operations  in  five  coun- 
tries, including  Laos,  Vietnam,  and  Angola.  The  Committee  analyzetl  paramili- 
tary programs  in  terms  of  (1)  executive  command  and  control;  (2)  secrecy  and 
deniability;  (3)  effectiveness;  (4)  propriety;  and  (5)  legislative  oversight.  The 
latter  issue  is  vital  because  paramilitary  oi)erations  are  directly  related  to,  and 
pose  special  problems  for.  Congress'  authority  and  responsibilities  in  making 
war. 


155 

(Laos)  ;  (3)  unconventional  adjunot  support  to  a  larger  war  eli'oit 
(Korea,  Vietnam,  Laos  after  the  middle  19608). 

There  are  two  principal  criteria  which  determine  tlie  minimum  suc- 
cess of  paramilitary  operations:  (1)  achievement  of  the  policy  goal; 
and  (2)  maintenance  of  deniability.  if  the  hrst  is  not  accomplished,  the 
operation  is  a  failure  in  any  case ;  if  the  second  is  not  accomplished,  the 
paramilitary  option  otiei-s  few  if  any  advantages  over  the  option  of 
overt  military  intervention.  On  balance,  in  these  terms,  the  evidence 
points  toward  the  failure  of  paramilitary  activity  as  a  technique  of 
covert  action.-^- 

Of  the  hve  paramilitary  activities  studied  by  the  Committee,  only 
one  appears  to  have  achieved  its  objectives.  The  goal  of  supporting  a 
central  govermnent  was  achieved — ^the  same  government  is  still  in 
power  many  years  later.  There  were  a  few  sporadic  reports  of  the 
operation  in  the  press,  but  it  was  never  fully  revealed  nor  confirmed. 

In  no  paramilitary  case  studied  by  the  Coimnittee  was  complete 
secrecy  successfully  presei-ved.  All  of  the  operations  wei'e  reported  in 
the  Amei-ican  press  to  varying  extents,  while  they  were  going  on.  They 
remained  deniable  oidy  to  the  extent  that  such  reports  were  tentative, 
sketchy,  and  unconfirmed,  and  hence  were  not  necessarily  considered 
accurate. 

3.  The  Itnpact  of  Covert  Action 

Assessing  the  "success"  or  "failure"  of  covert  action  is  necessary. 
Just  as  important,  however,  is  an  assessment  of  the  impact  of  covert 
action  on  "targeted"  nations  and  the  reputation  of  the  United  States 
abroad. 

The  impact  of  a  large-scale  covert  operation,  such  as  Operation 
MONGOOSE  in  Cuba,  is  apparent.  Less  apparent  is  the  impact  of 
small  covert  projects  on  "targeted"  countries.  The  Committee  has 
found  that  these  small  projects  can,  in  the  aggregate,  have  a  powerful 
effect  upon  vulnerable  societies. 

In  some  cases,  covert  support  has  encouraged  a  debilitating  de- 
pendence on  the  United  States.  In  one  Western  nation  the  covert 
investment  was  so  heavy  and  so  persistent  that,  according  to  a  former 
CIA  Station  Chief  in  that  country  : 

Any  aspiring  politician  almost  automatically  would  come 
to  CIA  to  see  if  we  could  help  him  get  elected  .  .  .  They  were 
the  wards  of  the  United  States,  and  that  whatever  happened 
for  good  or  bad  was  the  fault  of  the  United  States. 

Cyrus  Vance,  a  former  Deputy  Secretary  of  Defense,  cited  another 
such  example: 

Paramilitary  operations  are  perhaps  unique  in  that  it  is  more 
difficult  to  withdraw  from  them,  once  started,  than  covert 

32  For  example,  the  covert  paramilitary  program  in  Laos  certainly  ceased  to 
be  plausibly  deniable  as  soon  as  it  was  revealed  officially  in  the  1969  Symington 
hearings  of  the  Senate  Foreign  Relations  Committee  (it  was  revealed  unoffi- 
cially even  earlier).  If  U.S.  policy  was  the  preservation  of  a  non-communist 
Laotian  government,  the  program  obviously  failed.  Some  administration  wit- 
nesses, nevertheless,  including  DCI  Colby,  cite<l  the  war  in  Laos  as  a  great 
success.  Their  reasoning  was  l)ased  on  the  view  that  the  limited  effort  in  Laos 
served  to  put  pressure  on  North  Vietnamese  supply  lines,  and  therefore  was  a 
helpful  adjunct  of  the  larger  U.S.  effort  in  Vietnam. 


156 

operations.  This  is  well  illustrated  by  the  case  of  the  Conoo, 
where  a  decision  was  taken  to  withdraw  in  early  1966,  and  it 
'took  about  a  year  and  a  half  before  the  operation  was  tenni- 
naited.  Once  a  paramilitary  operation  is  commenced,  the  re- 
cipient of  the  paramilitary  aid  tends  to  become  dependent 
upon  it  and  inevitably  advances  the  aro^ument  that  to  cut  back 
or  terminate  the  aid  would  do  the  recipient  o;reat  damatje. 
This  makes  it  especially  difficult  to  diseno:age.^^ 

In  other  cases,  covert  support,  to  forei^  political  leadere,  parties, 
labor  unions,  or  the  media  has  made  them  vulnerable  to  repudiation  in 
their  own  society  when  their  covert  ties  are  exposed.  In  Chile, 
several  of  the  Chilean  nationals  who  had  been  involved  in  the  CIA's 
anti-Allende  "spoilino^"  operation  had  to  leave  the  country  when  he 
was  confirmed  as  President, 

In  addition,  the  history  of  covert  action  indicates  that  the  cumula- 
tive effect,  of  hidden  intervention  in  the  society  and  institutions  of  a 
foreign  nation  has  oft.en  not  only  transcended  the  actual  tlireat,  but 
it  has  also  limited  the  foreign  policy  options  available  to  the  United 
States  Government  by  creating  ties  to  gix)ups  and  causes  that  the 
United  States  cannot  renounce  without  revealing  the  earlier  covert 
action. 

The  Committee  also  found  that  the  cumulative  effects  of  covert 
action  are  rarely  noted  by  the  operational  divisions  of  the  CIA  in  the 
presentation  of  new  projects  or  taken  into  account  by  the  responsible 
National  Security  Council  review  levels. 

The  Committee  has  found  that  certain  covei-t  operations  have  been 
incompatible  with  American  principles  and  ideals  and,  when  exposed, 
have  resulted  in  damaging  this  nation's  ability  to  exercise  moral  and 
ethical  leadership  throughout  the  world.  The  U.S.  involvement  in 
assassination  plots  against  foreign  leaders  and  the  attempt  to  foment 
a  military  coup  in  Chile  in  1970  against  a  democratically  elected  gov- 
ernment were  two  examples  of  such  failures  in  purposes  and  ideals. 
Further,  because  of  widespread  exposure  of  covert,  operations  and 
suspicion  that  others  are  taking  place,  the  CIA  is  blamed  for  virtually 
every  foreign  internal  crisis. 

4.  The  Executive''s  Use  of  Covert  Action 

In  its  consideration  of  covert  action,  the  Committee  was  struck  by 
the  basic  tension — if  not  incompatibility — of  covert  operations  and 
the  demands  of  a  cons'titutional  svstem.  Secrecy  is  essential  to  covert 
operations;  secrecy  can,  however,  become  a  source  of  power,  a  l>arrier 
to  serious  policy  debate  within  government,  and  a  means  of  circum- 
venting the  established  checks  and  procedures  of  government.  The 
Committee  found  that  secrecy  and  compartmentation  contributed  to 
a  temptation  on  the  part  of  the  Executive  to  resort,  to  covert  o]:)erations 
in  order  to  avoid  bureaucratic,  congressional,  and  public  debate.  In 
addition,  the  Committee  found  that  the  major  successes  of  covert  ac- 
tion tended  to  encourage  the  Executive  to  press  for  the  use  of  covert 
action  as  the  easy  way  to  do  things  and  to  task  the  CIA  with  difficult 
requirements,  such  as  running  a  lai-ge-scale  "secret"  war  in  Laos  or 


'  Cyrus  Vance  testimony,  12/5/75,  Hearings,  Vol.  7.  p.  85,  footnote. 


157 

attempting  to  overturn  the  results  of  a  national  election  in  Chile — 
within  a  five-week  period. 

The  Connnittee  found  that  the  Executiv^e  Iras  used  the  CIA  to  con- 
duct covert  operations  because  it  is  less  'accountable  than  other  gov- 
ernment agencies.  In  this  regard,  Secretary  of  State  Henry  Kissinger 
told  the  Committee : 

I  do  not  believe  in  retrospect  that  it  was  good  national  policy 
to  have  the  CIA  conduct  the  war  in  L/aos.  I  think  we  should 
have  found  some  other  way  of  doing  it.  And  to  use  the  CIA 
simply  because  it  is  less  accountable  for  very  visible  major 
operations  is  poor  national  policy.  And  the  covert  activities 
should  be  confined  to  those  matters  that  clearly  fall  into  a 
gray  area  between  overt  military  action  and  diplomatic  activi- 
ties, and  not  to  be  used  siinply  for  the  convenience  of  the 
executive  branch  and  its  acooimtability.^^ 

Under  questioning,  Secretary  Kissinger  went  on  to  say  that  in  Laos 
there  were  two  basic  reasons  why  the  CIA  was  used  to  fight  that  war : 
"one,  to  avoid  a  formal  avowal  of  American  participation  there  for 
diplomatic  reasons,  and  tlie  second,  I  suspect,  because  it  was  less 
accountable.*'  ^"^ 

The  Committee  has  found  that  the  temptation  of  the  Executive  to 
use  covert  action  as  a  "convenience"  and  as  a  substitute  for  publicly 
accountable  policies  has  been  strengthened  by  the  hesitancy  of  the 
Congress  to  use  its  powers  to  oversee  covert  action  by  the  CIA.  Much 
of  this  hesitancy  flowed  from  the  legitimate  desire  on  the  part  of  con- 
gressional oversight  committees  to  maintain  the  security  of  covert 
action  projects.  But  it  also  resulted  from  a  reluctance  on  the  part  of 
the  appropriate  committees  to  challenge  the  President  or  to  become 
directly  involved  in  projects  perceived  to  be  necessary  foi-  the  national 
security.  Congressional  hesitancy  also  flowed  from  the  fact  that  con- 
gressional oversight  coinmittees  are  almost  totally  dependent  on  the 
Executive  for  information  on  covert  operations.  The  secrecy  needed 
for  these  operations  allows  the  Executive  to  justify  the  limited  provi- 
sion of  information  to  the  Congress. 

5.  Maintaining  a  Covert  Gayability 

Former  senior  government  officials  have  testified  to  their  concern 
that  the  use  and  control  of  covert  action  is  made  more  difficult  by  a 
strong  activism  on  the  part  of  CIA  operational  officers.  McGeorge 
Bundy,  a  former  Special  Assistant  for  National  Security  Affairs  to 
Presidents  Kennedy  and  Johnson,  has  Stated : 

While  in  principle  it  has  always  been  the  understanding  of 
senior  government  officials  outside  the  CIA  that  no  covert 
operations  would  be  undertakeii  without  the  explicit  approval 
of  "higher  authority,"'  there  has  also  been  a  general  expecta- 
tion within  the  Agency  that  it  was  its  proper  business  to  gen- 
erate atti-active  proposals  and  to  stretch  them,  in  operation, 
to  the  furthest  limit  of  any  authorization  actually  received.^' 


^^  Henry  Kissinger  tesitimony,  11/21/75,  p.  54. 
'"/birf.,  p.  56. 

^'  McGeorge    Bundy    testimony,     House    Select    Committee    on    Intelligence, 
12/10/75,  Hearings,  Vol.  5,  pp.  1794-1795. 


158 

Clark  Clifford,  in  testimony  before  the  Select  Committee,  reinforced 
this  view : 

On  a  number  of  occasions  a  plan  for  covert  action  has  been 
presented  to  the  NSC  and  authority  requested  for  the  CIA  to 
proceed  from  point  A  to  point  B.  The  authority  will  be  given 
and  the  action  will  be  launched.  When  point  B  is  reached, 
the  persons  in  charge  feel  that  it  is  necessary  to  go  to  point  C 
and  they  assume  that  the  oiiginal  authorization  gives  them 
such  a  right.  From  point  C,  they  go  to  D,  and  possibly  E,  and 
even  further.  This  led  to  some  bizarre  results,  and,  when 
investigation  is  started,  the  excuse  blandly  presented  that 
the  authority  was  obtained  from  the  NSC  before  the  project 
was  launched. ^^ 

The  activism  referred  to  by  Bundy  and  Clifford  is  reflected  in  part, 
in  the  maintenance  of  a  standing  covert  action  capability  and  a  world- 
wide "infrastructure."  The  Committee  found  that  one  of  the  most 
troublesome  and  controversial  issues  it  confronted  in  evaluating  covert 
action  was  the  question  of  the  utility  and  propriety  of  the  CIA's  main- 
taining a  worldwide  "infrastructure"  (e.g.,  agents  of  influence,  assets, 
and  media  contacts).  Are  these  "assets"  essential  to  the  success  of  a 
major  covert  action  program  ?  Or  does  this  standby  capability  generate 
a  temptation  to  intervene  covertly  as  an  alternative  to  diplomacy  ? 

There  is  no  question  that  the  CIA  attaches  great  importance  to  the 
maintenance  of  a  worldwide  clandestine  infrastructure — the  so-called 
"plumbing"^ — in  place.  During  the  1960s  the  Agency  developed  a 
worldwide  system  o,f  standby  covert  action  "assets,"  ranging  from 
media  personnel  to  individuals  said  to  influence  the  behavior  of  gov- 
ernments.^^ In  recent  yeai'S,  however,  the  Agency  has  substantially  re- 
duced its  overseas  covert  action  infrastructure  even  to  the  point  of 
closing  bases  and  stations.  A  limited  infrastructure  is  still  maintained, 
however.  For  example,  although  the  United  States  has  no  substantial 
covert  action  program  in  the  Western  Hemisphere  today,  the  CIA  does 
continue  to  maintain  a  modest  co\ert  action  infrastructure  consisting 
of  agents  of  influence  and  media  contacts. 

The  CIA's  infrastructure  is  constructed  in  response  to  annual  Oper- 
ating Directives.  These  directives  set  station  priorities  for  both  clan- 
destine collection  and  covert  action.'*°  The  Operating  Directives  are 
developed  and  issued  by  the  CIA  and  informally  coordinated  with 
concerned  CIA  geographic  bureaus  and  the  Department  of  State. 
Therefore,  the  infrastructure  that  is  in  place  at  any  given  time  is 
there  at  the  direction  of  the  CIA. 

The  Committee  finds  several  troublesome  problems  with  the  CIA's 
development    and    maintenance    of    covert     action     infrastructures 


■'"Clark  M.  Clifford  testimony  12/5/75,  Hearings.  Vol.  7,  pp.  51-.52. 

'"'  During  its  assassination  in(iuiry,  the  Committee  found  that  certain  CIA 
assets,  with  the  cryptonyms  QJ/WIN,  AVI/ROGUE  and  AM/LASH  were  in- 
volved, or  contemplated  for  use  in,  plots  to  assassinate  foreign  leaders. 

^''  For  example,  the  Chilean  Operating  Directive  for  FY  1972  directed  the 
Santiago  Station  to :  "Sponsor  a  program  which  will  enable  the  Chilean  armed 
forces  to  retain  their  integrity  and  independent  political  power.  I'rovide  direct 
financial  support  to  key  military  figures  who  can  he  expected  to  develop  a  mean- 
ingful following  in  their  respective  services  to  restrain  and,  perhaps,  topple  the 
Allende  government."  The  Select  Committee  found  no  evidence  to  indicate  that 
this  "direct  financial  support"  was  provided. 


159 

throughout  the  world:  (1)  The  operating  decisions  are  made  by  the 
CIA,  althougli  infrastructure  guidelines  are  cleared  with  the  State 
Department;  the  Agency's  Operating  Directives  are  rarely  seen  out- 
side the  CIA  and  (2)  the  actual  covert  action  projects  which  build 
and  maintain  these  infrastructures  rarely,  if  ever,  go  to  the  NSC  for 
approval. 

The  Connnittee  finds  that  the  independent  issuance  of  Operating 
Directives,  and  the  fact  that  most  covert  action  projects  which  estab- 
lish and  maintain  the  CIA's  infrastructure  around  the  world  do  not 
go  to  the  NSC,  combine  to  shield  this  important  clandestine  system 
from  effective  policy  control  and  guidance.  The  Committee  believes 
that  all  small  so-called  "non-sensitive"  projects  which  do  not  now  go 
to  the  NSC  level  for  approval  should,  at  a  minimiun,  be  aggregated 
into  appropriate  country  or  regional  programs,  and  then  brought  to 
the  NSC  level  for  approval. 

Covert  action  should  be  the  servant  of  policy.  Secretary  Kissinger 
made  this  point  before  the  Connnittee  when  he  testified  : 

If  the  diplomatic  track  cannot  succeed  without  the  covert 
track,  then  the  covert  track  was  imnecessary  and  should  not 
have  been  engaged  in.  So  hopefully,  if  one  wants  to  draw  a 
general  conclusion,  one  would  have  to  say  that  only  those  co- 
vert actions  can  be  justified  that  support  a  diplomatic  track.^^ 

6.  Conclusions 

Given  the  open  and  democratic  assumptions  on  which  our  govern- 
ment is  based,  the  Committee  gave  serious  consideration  to  proposing 
a  total  ban  on  all  forms  of  covert  action.  The  Committee  has  con- 
cluded, however,  that  the  ITnited  States  should  maintain  the  option 
of  reacting  in  the  future  to  a  grave,  unforeseen  threat  to  United 
States  national  security  through  covert  means. 

The  Hughes-Ryan  amendment  to  the  1974  Foreign  Assistance  Act 
restricts  the  CIA  fix>m  undertaking  "operations  in  foreign  countries, 
other  than  activities  intended  for  obtaining  necessary  intelligence, 
unless  and  until  the  President  finds  that  each  such  operation  is  impor- 
tant to  the  national  security  of  the  United  States."  *^  The  Committee 
has  concluded  that  an  even  stricter  standard  for  the  use  of  covert  action 
is  required  than  the  injunction  that  such  operations  be  "important  to 
the  national  security  of  the  United  States." 

The  Committee's  review  of  covert  action  has  underscored  the  neces- 
sity for  a  thoroughgoing  strengthening  of  the  Executive's  internal 
review  process  for  covert  action  and  for  the  establishment  of  a  realistic 
system  of  accountability,  both  within  the  Executive,  and  to  the  Con- 
gress and  to  the  American  people.  The  requirement  for  a  rigorous  and 
credible  system  of  control  and  accountability  is  complicated,  however, 
by  the  shield  of  secrecy  which  must  necessarily  be  imposed  on  any 
coveit  activity  if  it  is  to  remain  covert.  The  challenge  is  to  find  a  sub- 
stitute for  the  public  scrutiny  thi'ough  congressional  debate  and  press 
attention  that  normally  attends  government  decisions.  In  its  considera- 
tion of  the  present  processes  of  authorization  and  review,  the  Commit- 
tee has  found  the  following : 


Henry  Kissinger  tesftimony,  11/21/75.  p.  38. 

See  p.  1.51,  for  full  text  of  Hughes-Ryan  amendment. 


160 

(1)  The  most  basic  conclusion  reached  by  the  Committee  is  that 
covert  action  must  be  seen  as  an  exceptional  act,  to  be  undertaken  only 
when  the  national  security  requires  it  and  when  overt  means  will  not 
suffice.  The  Committee  concludes  that  the  policy  and  procedural  bar- 
riers are  presently  inadequate  to  insure  that  any  covert  operation  is 
absolutely  essential  to  the  national  security.  These  barriers  must  be 
tightened  and  raised  or  covert  action  should  be  abandoned  as  an  in- 
strument of  foreign  policy. 

(2)  On  the  basis  of  the  record,  the  Committee  has  concluded  that 
covert  action  must  in  no  case  be  a  vehicle  for  clandestinely  undertaking 
actions  incompatible  with  American  principles.  The  Committee  has 
already  moved  to  condemn  assassinations  and  to  recommend  a  statute 
to  forbid  such  activit3\  It  is  the  Committee's  view  that  the  standards 
to  acceptable  covert  activity  should  also  exclude  covert  operations  in 
an  attempt  to  subvert  democratic  governments  or  provide  support  for 
police  or  other  internal  security  forces  which  engage  in  the  systematic 
violation  of  human  rights. 

(3)  Covert  operations  must  be  based  on  a  careful  and  systematic 
analysis  of  a  given  situation,  possible  alternative  outcome,  the  threat 
to  American  interests  of  these  possible  outcomes,  and  above  all,  the 
likely  consequences  of  an  attempt  to  intervene.  A  former  senior  intelli- 
gence analyst  told  the  Committee : 

Clearly  actions  were  taken  on  the  basis  of  some  premises,  but 
they  seem  not  to  have  been  arrived  at  by  any  sober  and  sys- 
tematic analysis,  and  tended  often,  it  appeared,  to  be  sim- 
plistic and  passionate.  In  fact,  thei-e  was  often  little  or  no 
relationship  between  the  view  of  world  politics  as  a  whole,  or 
of  particular  situations  of  threat  held  by  operatoi's  on  the 
one  hand,  and  analysts  on  the  other.  The  latter  were  rarely 
consulted  by  the  former,  and  then  only  in  partial  disingenious 
and  even  misleading  ways. 

It  says  something  strange  about  successive  DCIs  that  they 
allowed  this  bifurcation,  even  contradiction,  to  obtain.*^ 

The  Committee  has  concluded  that  bringing  the  analysts  directly 
into  the  forinal  decision  process  would  be  a  partial  remedy  to  the  prob- 
lem of  relating  analysis  to  operations.  More  important  would  be  the 
insistence  of  the  Director  of  (Central  Intelligence  that  the  political 
premises  of  any  proposed  covert  operation  be  rigorously  analyzed. 

(4)  The  Committee  also  concludes  that  the  appropriate  NSC  com- 
mittee (e.g.,  the  Operations  Advisory  Group)  should  review  every 
covert  action  proposal.  The  Committee  also  hold,s  strongly  to  the  view 


"  .John  Huizenga  testimony,  1/26/76,  pp.  6-7.  The  Committee  found,  in  its 
case  study  of  Chile,  that  there  was  little  or  no  coordination  between  the  intelli- 
gence analysts  and  the  covert  operators,  e.specially  in  politically  sensitive  proj- 
ects, which  were  often  restricted  within  the  Clandestine  Service  and  the  40 
Committee.  The  project  files  for  Chile  gave  no  indication  of  consultation  with  the 
Intelligence  Directorate  from  1964  to  1973.  The  exclusion  of  expert  analytic 
advice  extended  to  the  DCI's  staff  responsible  for  preparing  National  Intelligence 
Estimates.  Today,  however,  the  Deputy  Director  for  Intelligence  (DDI)  is  in- 
formed by  the  DDO  of  new  covert  activities.  The  DDI  has  an  opportunity  to 
comment  on  them  and  offer  recommendations  to  the  DCI,  but  he  is  not  in  the 
formal  approval  process. 


161 

that  the  small  nonsensitive  covert  action  proposals  which,  in  the  aggre- 
gate,  establish  and  maintain  the  Agency's  covert  infrastructure  around 
tlie  world  should  he  considered  and  analyzed  by  the  appropriate  NSC 
committee.  The  Connnittee  also  l)elieves  that  many  of  the  small  covert 
action  proposals  for  projects  would  fall  away  when  forced  to  meet  the 
test  of  being  part  of  a  larger  covert  action  operation  in  support  of  the 
openly  avoAved  policies  of  the  United  States. 

(5)  With  respect  to  congressional  oversight  of  covert  action,  the 
Committee  believes  that  the  appropriate  oversight  committee  should 
be  informed  of  all  significant  covert  operations  prior  to  their  initia- 
tion and  that  all  covert  action  projects  should  be  reviewed  by  the  com- 
mittee on  a  semi-annual  basis.  Further,  the  oversight  committee  should 
require  that  the  annual  budget  submission  for  covert  action  programs 
be  specific  and  detailed  as  to  the  activity  recommended.  Unforeseen 
covert  action  projects  should  be  funded  only  from  the  Contingency 
Reserve  Fund  which  could  be  replenished  only  after  the  concurrence 
of  the  oversight  and  any  other  appropriate  congressional  committees. 
The  legislative  intelligence  oversight  committee  should  be  notified 
prior  to  any  withdrawal  from  the  Contingency  Reserve  Fund. 


IX.  CIA  COUNTERINTELLIGENCE 

A.  Counterintelligence:  an  Introduction 

1.  Definition  of  C ounterintelligence 

Counterintelligence  (CI)  is  a  special  form  of  intelligence  activity, 
separate  and  distinct  from  other  disciplines.  Its  purpose  is  to  discover 
hostile  foreign  intelligence  operations  and  destroy  their  effectiveness. 
This  objective  involves  the  protection  of  the  United  State  Govern- 
ment against  infiltration  by  foreign  agents,  as  well  as  the  control  and 
manipulation  of  adversary  intelligence  operations.  An  effort  is  made 
to  both  discern  and  decive  the  plans  and  intentions  of  enemy  intel- 
ligence services.  Defined  more  formally,  counterintelligence  is  an  in- 
telligence activity  dedicated  to  undermining  the  effectiveness  of  hostile 
intelligence  services.  Its  purpose  is  to  guard  the  nation  againt  espion- 
age, other  modern  forms  of  spying,  and  sabotage  directed  against  the 
United  States,  its  citizens,  information,  and  installations,  at  home 
and  abroad,  by  infiltrating  groups  engaged  in  these  practices  and  by 
gathering,  storing,  and  analyzing  information  on  inimical  clandestine 
activity.^ 

In  short,  counterintelligence  specialists  wage  nothing  less  than  a 
secret  war  against  antagonistic  intelligence  services.  "In  the  absence 
of  an  effective  LT.S.  counterintelligence  program,"  notes  a  counterin- 
telligence specialist,  "[adversaries  of  democracy]  function  in  what  is 
largely  a  benign  environment."  ^ 

^.  Tlie  Threat 

The  adversaries  of  democracy  are  numerous  and  widespread.  In  the 
Ignited  States  alone,  1,079  Soviet  officials  were  on  permanent  assign- 
ment in  February  1975,  according  to  FBI  figures.^  Among  these,  over 
40  percent  have  Ijeen  positively  identified  as  members  of  the  KGB  or 
GRI^,  the  Soviet  civilian  and  military  intelligence  units.  Conservative 
estimates  for  the  number  of  imidentified  intelligence  officers  raise  the 
figures  to  over  60  percent  of  the  Soviet  representation ;  some  defector 
sources  have  estimated  that  70  percent  to  80  percent  of  Soviet  officials 
have  some  intelligence  connection.* 

Furthermore,  the  number  of  Soviets  in  the  United  States  has  triplea 
since  1960,  and  is  still  increasing.'^  The  opening  of  American  deep- 
water  ports  to  Russian  ships  in  1972  has  given  Soviet  intelligence 

^  Counterintelligence  may  also  be  thought  of  as  the  knowledge  needed  for  the 
protection  and  preservation  of  the  military,  economic,  and  productive  strength 
of  the  United  States,  including  the  security  of  the  Government  in  domestic  and 
foreign  affairs  against  or  from  espionage,  sabotage,  and  all  other  similar 
clandestine  activities  designed  to  weaken  or  destroy  the  United  States.  (Report 
of  the  Commission  on  Government  Security  Washington,  D.C.,  19.57.  pp.  4.S-49. ) 

"  Staff  summary  of  interview,  FBI  counterintelligence  specialist,  5/8/7.5. 

^  Staff  summary  of  interview,  FBI  counterintelligence  specialist.  3/10/75. 

*  FBI  counterintelligence  specialist  (staff  summary),  3/10/75. 

"''  FBI  counterintelligence  specialist  (staff  summary),  5/8/75. 

(163) 


164 

services  "virtually  complete  geographic  access  to  the  United  States," 
observes  a  counterintelligence  specialist.*'  In  1974,  for  example,  over  200 
Soviet  ships  with  a  total  crew  complement  of  13,000  officers  and  men 
called  at  40  deep-water  ports  in  this  country. 

Various  exchange  groups  provide  additional  opportunities  for  Soviet 
intelligence  gathering  within  the  United  States.  Some  4,000  Soviets 
entered  the  United  States  as  commercial  or  exchange  visitors  in  1974. 
During  the  past  decade,  the  FBI  identified  over  100  intelligence  officers 
among  the  approximately  400  Soviet  students  who  attended  American 
•universities  during  this  period  as  part  of  an  East- West  student 
exchange  program.'  Also,  in  the  14-year  history  of  this  program,  more 
than  100  American  students  were  the  target  of  Soviet  recruitment 
approaches  in  the  USSR. 

Other  areas  of  counterintelligence  concern  include  the  sharp  increase 
in  the  number  of  Soviet  immigrants  to  the  United  States  (less  than  500 
in  1972  compared  to  4,000  in  1974)  ;  the  rise  in  East- West  commercial 
exchange  visitors  (from  641  in  1972  to  1,500  in  1974)  ;  and  the  growing 
number  of  Soviet  bloc  officials  in  this  country  (from  416  in  1960  to  798 
in  1975 ).« 

Foreign  intelligence  agents  have  attempted  to  recruit  not  only  execu- 
tive branch  personnel,  but  also  Congressional  staff  members.  The  FBI 
has  advised  the  Committee  that  there  have  been  instances  in  the  past 
where  hostile  foreign  intelligence  officers  have  used  the  opportunity 
presented  by  overt  contacts  to  attempt  to  recruit  members  of  Congres- 
sional staffs  who  might  have  access  to  secret  information.^* 

The  most  serious  threat  is  from  "illegal"  agents  who  have  no  easily 
detectable  contacts  with  their  intelligence  service.  The  problem  of 
"illegals"  is  summarized  by  the  FBI  as  follows : 

The  illegal  is  a  highly  trained  specialist  in  espionage  trade- 
craft.  He  may  be  a  [foreign]  national  and/or  a  professional 
intelligence  officer  dispatched  to  the  United  States  under  a 
false  identity.  Some  illegals  [may  be]  trained  in  the  scientific 
and  technical  field  to  permit  easy  access  to  sensitive  areas  of 
employment. 

The  detection  of  . . .  illegals  presents  a  most  serious  problem 
to  the  FBI,  Once  they  enter  the  United  States  with  either 
fraudulent  or  true  documentation,  their  presence  is  obscured 
among  the  thousands  of  legitimate  emigres  entering  the 
United  States  annually.  Relatively  undetected,  they  are  able 
to  maintain  contact  with  [the  foreign  control]  by  means  of 
secret  writing,  microdots,  and  open  signals  in  conventional 
communications  which  are  not  susceptible  to  discovery 
through  conventional   investigative  measures.^*" 


•  IMd. 

'  IMd,  3/10/75. 

*  IMd. 

**  FBI  Memorandum  for  the  Record,  10/30/75.  Such  recruitment  approaches 
have  heen  reported  to  the  FBI  by  Congressional  staff  members.  If  the  FBI  other- 
wise learns  of  such  recruitments,  its  policy  is  to  report  the  facts  to  the  appro- 
priate Members  of  Congress. 

^^  FBI  memorandum,  "Intelligence  Activities  Within  the  United  States  by 
Foreign  Governments,"  3/20/75. 


165 

In  several  instances  the  FBI  accomplished  this  most  difl3.cult  assign- 
ment by  carefully  designed  and  limited  mail  opening  programs  which, 
if  they  had  ben  authorized  by  a  judicial  warrant,  might  have  been  en- 
tirely proper.  It  is  most  unfortunate  that  the  FBI  did  not  choose  to  seek 
lawful  authorization  for  such  methods.^'^ 

This  brief  summary  of  the  threat  facing  the  American  counterintel- 
ligence corps  in  this  country  is  troubling  enough,  yet  it  does  not  take 
into  accomit  the  worldwide  scope  of  the  problem.  As  an  FBI  counter- 
intelligence expert  states,  hostile  foreign  intelligence  services 

are  alert  for  operational  opportunities  against  the  United 
States  whether  they  occur  within  this  country,  abroad  (in 
other  countries)  or  in  the  home  country  itself.  An  operation 
might  begin  in  the  home  country  with  recruitment  of  an 
American  visitor;  transfer  to  the  United  States  with  his 
return ;  and  again,  even  later,  might  be  transferred  to  a  third 
country  where  the  American  agent  may  be  met  outside  the 
normal  reach  of  United  States  counterintelligence  coverage. 
Regardless  of  the  geographical  location,  the  operation  is  still 
directed  against  the  United  States  and  can  cause  just  as  much 
damage  from  abroad  as  within  our  own  borders.® 

The  espionage  activities  of  the  Soviet  Union  and  other  communist 
nations  directed  against  the  United  States  are  extensive  and 
relentless.®^ 

To  combat  this  threat,  American  counterintelligence  officers  have 
developed  various  sophisticated  investigative  techniques  to  (1)  obtain 
information  about  foreign  intelligence  services,  (2)  protect  our 
intelligence  service,  and  (3)  control  the  outcome  of  this  subterranean 
struggle  for  intelligence  supremacy.  The  task  is  difficult  technically, 
and  raises  sensitive  legal  and  ethical  questions.  As  the  CIA  Deputy 
Director  for  Operations  has  testified,  the 

U.S.  counterintelligence  program  to  be  both  effective  and  in 
line  with  traditional  American  freedoms  must  steer  a  middle 
course  between  blanket,  illegal,  frivolous  and  unsubstanti- 
ated inquiries  into  the  private  lives  of  U.S.  citizens  and  exces- 
sive restrictions  which  will  render  the  Government's  counter- 
intelligence arms  impotent  to  protect  the  nation  from  foreign 
penetration  and  covert  manipulation.^" 

3.  CI  as  Product:  Information  about  '"''The  Etiermf' 

Counterintelligence  is  both  an  activity  and  its  product.  The  product 
is  reliable  information  about  all  the  hostile  foreign  intelligence  serv- 
ices who  attack  the  United  States  by  stealth.  To  guard  against  hostile 
intelligence  operations  aimed  at  this  nation,  a  vast  amount  of  infor- 
mation is  required.  It  is  necessaiy  to  laiow  the  organizational  structure 
of  the  enemy  service,  the  key  personnel,  the  methods  of  recruitment 
and  training,  and  the  specific  operations. 

This  information  must  be  gathered  within  the  United  States  and  in 
all  the  foreign  areas  to  which  U.S.  interests  extend.  Within  the  intelli- 

*"  Testimony  of  W.  R.  Wannall,  Assistant  Director,  FBI,  10/21/75,  p.  5;  see 
Report  on  CIA  and  FBI  Mail  Opening. 

"  FBI  Counterintelligence  specialist  ( staff  summary ) ,  3/10/75. 

*''  See  Appendix  III,  Soviet  Intelligence  Collection  and  Operations  Against  the 
United  States. 

'^  "William  Nelson  testimony,  1/28/76,  p.  5. 


166 

gence  service,  this  acquisitive  activity  is  referred  to  as  intelligence 
collection.  The  resulting  product — pertinent  information  on  the  enemy 
intelligence  service — is  often  called  "raw"  intelligence  data.  The  efforts 
of  intelligence  services  through  the  world  to  conceal  such  information 
from  one  another,  through  various  security  devices  and  elaborate  de- 
ceptions, creates  the  counterintelligence  specialist  what  James  Angle- 
ton,  former  Chief  of  CIA  Counterintelligence,  calls  a  kind  of  "wilder- 
ness of  mirrors." 

!)..  CI  as  Activity :  Security  and  C ounteres'pionage 

As  an  activity,  CI  consists  of  two  matching  halves:  security  and 
counterespionage.  Security  is  the  passive  or  defensive,  side  of  counter- 
intelligence. It  consists  basically  of  establishing  static  defenses  against 
all  hostile  and  concealed  acts,  regardless  of  who  carries  them  out. 

C ounteresfionage  (CE)  is  the  offensive,  or  aggressive,  side  of  coun- 
terintelligence. It  involves  the  identification  of  a  specific  adversary  and 
a  knowledge  of  the  specific  operation  he  is  conducting.  Counterespion- 
age personnel  must  then  attempt  to  counter  these  operations  by  infil- 
trating the  hostile  service  (called  penetration)  and  through  various 
forms  of  manipulation.  Ideally,  the  thrust  of  the  hostile  operation  is 
turned  back  against  the  enemy. 

The  security  side  of  counterintelligence  includes  the  screening  and 
clearance  of  personnel  and  the  development  of  programs  to  safeguard 
sensitive  intelligence  information  (that  is,  the  proper  administration 
of  security  controls).  The  intelligence  services  try  to  defend  three 
things:  (1)  their  personnel,  (2)  their  installations,  and  (3)  their 
operations. 

At  the  Central  Intelligence  Agency,  the  Office  of  Security  is  respon- 
sible for  protection  of  pei'sonnel  and  installations,  while  actual  oper- 
ations are  largely  the  preserve  of  the  CI  staff  and  the  operating  divi- 
sions. Among  the  defensive  devices  used  for  information  control  by 
intelligence  agencies  throughout  the  world  are:  security  clearances, 
polygraphs,  locking  containers,  security  education,  document  ac- 
coimtability,  censorship,  camouflage,  and  codes.  Devices  for  physical 
security  include  fences,  lighting,  general  systems,  alarms,  badges  and 
passes,  and  watchdogs.  Area  control  relies  on  curfews,  checkpoints,  re- 
stricted areas,  and  border-frontier  control.^-  Thus  the  security  side  of 
counterintelligence  "is  all  that  concerns  perimeter  defense,  badges, 
knowing  eveiything  you  have  to  know  about  your  own  people;"  the 
counterespionage  side  "involves  knowing  all  about  intelligence  serv- 
ices— foreign  intelligence  services — theii-  people,  their  installations, 
their  methods,  and  their  operations.  So  that  you  have  a  completely 
different  level  of , interest."  ^^  However,  the  Office  of  Security  and  the 
CI  staff  exchange  information  to  assure  adequate  security  systems. 

5.  The  Penetration  and  the  Double  Agent 

Several  kinds  of  operations  exist  w^ithin  the  rubric  of  counterespion- 
age. One,  however,  transcends  all  the  others  in  importance:  the  pene- 
tration. A  primary  goal  of  counterintelligence  is  to  contain  the  intel- 
ligence service  of  the  enemy.  To  do  so,  it  is  eminently  desirable  to 

'■  staff  summary  of  interview,  CIA  security  specialist,  8/20/75. 
"  Raymond  Rocca  deposition,  11/25/75,  p.  19. 


167 

know  his  plans  in  advance  and  in  detail.  This  admirable,  but  difficult 
objective  may  be  achieved  through  a  high-level  infiltration  of  the  op- 
position service.  As  a  Director  of  the  CIA  has  written,  "Experience  has 
shown  penetration  to  be  the  most  effective  response  to  Soviet  and  Bloc 
Lmtelligence]  services."  " 

Moreover,  a  well-placed  infiltrator  in  a  hostile  intelligence  service 
may  be  better  able  than  anyone  else  to  determine  whether  one's  own 
service  has  been  penetrated.  A  former  Director  of  the  Defense 
Intelligence  Agency  (DIA)  has  observed  that  the  three  principal  pro- 
grams used  by  the  United  States  to  meet,  neutralize,  and  defeat  hos- 
tile intelligence  penetrations  are:  (1)  our  own  penetrations;  (2)  se- 
curity screening  and  clearance  of  personnel;  and  (3)  our  efforts  for 
safeguarding  sensitive  intelligence  information.^^  The  importance  of 
the  penetration  is  emphasized  by  an  experienced  CIA  counter- 
espionage operative,  with  mixed  but  expressive  similes:  "Conduct- 
ing counterespionage  with  penetration  can  be  like  shooting  fish  in  a 
barrel;"  in  contrast,  "conducting  counterespionage  without  the  act 
of  penetration  is  like  fighting  in  the  dark."  >^ 

Methods  of  infiltrating  the  opposition  service  take  several  forms. 
Usually  the  most  effective  and  desirable  penetration  is  the  recruit- 
ment of  an  agent-in-place.^^  He  is  a  citizen  of  an  enemy  nation  and 
is  already  in  the  employ  of  its  intelligence  service.  Ideally,  he 
will  be  both  highly  placed  and  venal.  The  individual,  say  a  KGB 
officer  in  Bonn,  is  approached  and  asked  to  work  for  the  intelligence 
service  of  the  United  States.  Various  inducements — including  ideol- 
ogy— may  be  used  to  recruit  him  against  his  own  service.  If  the 
recruitment  is  successful,  the  operation  may  be  especially  worthwhile 
since  the  agent  is  presumably  already  trusted  within  his  organiza- 
tion and  his  access  to  documents  may  be  unquestioned.  Jack  E.  Dun- 
lap,  who  worked  at  and  spied  on  the  National  Security  Agency 
(NSA)  in  the  1960s,  is  a  well-known  example  of  a  Soviet  agent-in- 
place  within  the  U.S.  intelligence  service.  His  handler  was  a  Soviet 
Air  Force  attache  at  the  Soviet  Embassy  in  Washington.  Of  course, 
a  single  penetration  can  be  worth  an  intelligence  gold  mine,  as  were 
Kim  Philby  for  the  Soviet  Union  and  Col.  Oleg  Penkovsky  for  the 
United  States. 

Another  method  of  infiltration  is  the  double  agent.  Double  agents, 
however,  are  costly  and  time-consuming,  and  they  are  risky.  Human 
lives  are  at  stake.  Double  agents  also  normally  involve  pure 
drudgery,  with  few  dramatic  results,  as  new  information  is  checked 
against  existing  files.  On  top  of  this  comes  the  difficulty  of  assuring 
against  a  doublecross. 

Moreover,  passing  credible  documents  can  be  a  major  problem. 
The  operations  must  be  made  interesting  to  the  opposition.  To  make 
fake  papers  plausible,  the  genuine  article  must  be  provided  now  and 
again.  Classified  documents  must  be  cleared,  and  this  process  can  be 


"Memorandum  from  John  McCone  to  Chairman,  President's  Foreign  Intel- 
ligence Advisory  Board.  10/8/63. 

"  The  Carroll  Report  on  the  Dunlap  Case,  2/12/64. 
'"  CIA/CI  specialist,  staff  summary,  11/1/75. 
"  CIA/CI  specialist,  staff  summary,  10/17/75. 


168 

painstakingly  slow.  Also,  "this  means  letting  a  lot  of  good  stuff  go  to 
the  enemy  without  much  in  return,"  complains  a  CI  officer  with  con- 
siderable experience.^^ 

To  accomplish  each  of  these  tasks,  hard  work,  careful  planning,  and 
considerable  manpower  are  necessary.  The  extraordinary  manpower 
requirements  of  the  double  agent  operation  restricted  the  abilities 
of  the  British  to  run  cases  during  the  Second  World  War^ — approxi- 
mately 150  double  agents  for  the  entire  period  of  the  war  and  no  more 
than  about  25  at  any  one  time.^^  Moreover,  their  mission  was  eased 
greatly  by  the  ability  of  the  British  to  read  the  German  cipher 
throughout  most  of  the  conflict. 

6.  The  Defector 

Almost  as  good  as  the  agent-in-place  and  less  troublesome  than  the 
whole  range  of  double  agents  is  the  "defector  with  knowledge.''  Here 
the  procedure  consists  of  interrogation  and  validation  of  bona  fides,  as 
usual,  but  without  the  worrisome,  ongoing  requirements  for  a  skillful 
mix  of  false  and  genuine  documents  and  other  logistical  support. 
Though  an  agent-in-place  is  preferable  because  of  the  continuing  use- 
ful information  he  can  provide,  often  a  man  does  not  want  to  risk  his 
life  by  staying  in-place,  especially  where  the  security  is  sophisticated; 
his  preference  is  to  defect  to  safety.  In  other  words,  agents-in-place  are 
harder  to  come  by  in  systems  like  the  Soviet  bloc  countries;  defection 
is  more  likely. ^°  In  contrast,  agents-in-place  are  more  easily  recruited 
in  so-called  Third  World  areas. 

Within  the  United  States,  the  interrogation  of  intelligence  service 
defectors  who  have  defected  in  the  U.S.  is  primarily  the  responsibility 
of  the  FBI,  though  the  CIA  may  have  a  folloAv-up  session  with  the 
individual.  Sometimes  the  bona  fides  of  a  defector  remain  disputed  for 
many  years. 

CIA-recruited  defectoi-s  abroad  are  occasionally  brought  to  the 
United  States  and  resettled.  The  FBI  is  notified  and,  after  the  CIA 
completes  its  interrogation,  FBI  may  interrogate.  CIA  does  not  bring 
all  defectors  to  the  United  States;  only  those  expected  to  make  a  sig- 
nificant contribution.  CIA  generally  handles  resettlement  not  only  of 
defectors  from  abroad,  but  also  (at  the  request  of  the  FBI)  of  de- 
fectors in  the  United  States. 

7.  The  Deception 

The  penetration  or  double  agent  is  closely  related  to  another  impor- 
tant CE  technique:  the  deception.  Simply  stated,  the  deception  is  an 
attempt  to  give  the  enemy  a  false  impression  about  something,  caus- 
ing him  to  take  action  contrary  to  his  own  interests.  Fooling  the  Ger- 
mans into  the  belief  that  D  Day  landings  were  to  be  in  the  Pas  de  Calais 
rather  than  in  Normandy  is  a  classic  example  of  a  successful  deception 
operation  in  World  War  II.^^ 


'*  Rocca  deposition,  11/25/75,  pp.  33-.34. 

^*  Sir  .Tohn  Masterman,  Double  Cross  System  of  the  War  of  1939-Jf5    (New 
Haven  :  Yale  University  Press,  1972) . 
■"  Bruce  Solie,  deposition,  11/25/75,  pp.  26-27. 
"'  Masterman,  Double  Cross  System. 


169 

Deception  is  related  to  penetration  because  our  agents  operating 
within  foreign  intelligence  agencies  can  serve  as  excellent  cliaimels 
through  which  misleading  information  can  How  to  the  enemy.  So 
double  agents  serve  both  as  collectors  of  positive  intelligence  and 
channels  for  deception.  However,  there  are  opportunities  for  deception 
other  than  our  own  agents;  in  fact,  "an  infinite  variety''  exists,  accord- 
ing to  an  experienced  practitioner.^^  One  example:  the  U.S.  can 
allow  penetration  of  its  own  intelligence  service,  and  then  feed  false 
information  through  him. 

8.  Other  CI  Techniques 

Other  counterespionage  operations  include  surreptitious  surveil- 
lance of  various  kinds  (for  instance,  audio,  mail,  physical,  and  "opti- 
cal"— that  is,  photography),  interrogation  (sometimes  incommuni- 
cado as  in  the  case  of  one  defector) ,  and  provocation.  Decoding  clandes- 
tine radio  transmission  and  letters  with  messages  written  in  secret 
ink  between  the  visible  lines  is  part  and  parcel  of  the  CE  trade,  as  is 
trailing  suspected  agents,  observing  "dead  droj)s"  (the  exchange  of 
material,  like  documents  or  instructions,  between  a  spy  and  his  han- 
dler), and  photographing  individuals  entering  opposition  embassies 
or  at  other  locations.  At  the  recent  funeral  of  CIA  agent  Kichard 
Welch,  two  Eastern  European  diplomats  were  discovered  among  the 
press  corps  snapping  photographs  of  CIA  intelligence  officers  attend- 
ing the  burial  ceremony.^*  Since  the  focus  of  offensive  counterintelli- 
gence is  disruption  of  the  enemy  service,  provocation  can  be  an  im- 
portant element  of  CE,  too.  It  amounts,  in  essence,  to  harassment  of 
the  opiX)sition,  such  as  publishing  the  names  of  his  agents  or  sending 
a  defector  into  his  midst  who  is  in  reality  a  double  agent. 

9.  CI  as  Organization 

Security  at  CIA  is  the  responsibility  of  the  Office  of  Security,  a 
division  of  the  Dejjuty  Director  for  Administration.  Counterespionage 
policy  is  guided  by  the  Counterintelligence  Staff  of  the  Operations 
Directorate  (Clandestine  Service).  Besides  setting  policy,  the  CI  Staff 
sometimes  conducts  its  own  operations,  though  most  CI  operations 
emanate  directly  from  the  various  geographic  divisions  as  the  CI  field 
personnel — through  the  practice  of  the  counterintelligence  discipline — 
attempt  to  guard  against  enemy  manipulation  of  espionage  and  covert 
action  operations. 

Structurally,  counterintelligence  services  are  usually  composed  of 
two  additional  sections  which  support  Security  and  Operations.  They 
are  the  Research  and  the  Liaison  sections.  Good  research  is  critical 
to  a  good  counterintelligence  effort,  and  it  may  take  several  forms.  It 
can  involve  the  amassing  of  encyclopedic  intelligence  on  individuals, 
including  American  citizens  associated — wittingly  or  unwitttingly — 
with  hostile  intelligence  services.  Specialists  say  that  the  hallmark  of 
a  sophisticated  CI  service  is  its  collection  of  accurate  records.^"^  CI 
research  personnel  also  produce  reports  on  topics  of  interest  to  the 
specialty,  including  guidelines  for  the  interrogation  of  defectors  and 
current  analyses  on  such  subjects  as  proprietary  companies  used  by 

^"  CTA  counterintelligence  specialist  (staff  summary).  11/1/75. 
^*  CIA  counterintelligence  specialist   (staff  summary),  1/15/76. 
^  6/27/75. 
"=  Ihid,  6/27/75. 


69-983   O  -  7fi  -  12 


170 

foreign  intelligence  services  and  the  structure  of  Soviet  bloc  intel- 
ligence services.  CI  researchers  also  analyze  defector  briefs  and,  in  the 
case  of  compromised  documents,  help  ascertain  who  had  access  and 
what  damage  was  inflicted. 

Liaison  with  other  counterintelligence  services,  'at  home  and  abroad, 
is  also  vital  since  no  effective  counterintelligence  organization  can  do 
its  job  alone.  The  various  CI  units  at  home  are  particularly  impor- 
tant, as  counterintelligence — ^with  all  its  intricacies  and  deceptions — 
requires  coordination  among  agencies  and  sharing  of  records.  Unlike 
the  totally  unified  KGB  organization,  the  American  intelligence  serv- 
ice is  fragmented  and  depends  upon  liaison  to  make  operations  more 
effective.  Coordination  between  CIA  and  FBI  counterintelligence 
units  is  esipecially  critical  since,  in  theory  at  least,  the  former  has  for- 
eign jurisdiction  and  the  latter  domestic,  yet  they  must  monitor  the 
movements  of  foreign  spies  in  and  out  of  these  two  jurisdictions.  Some- 
times this  coordination  fails  dramatically.  In  1970,  for  example,  J. 
Edgar  Hoover  of  the  FBI  terminated  formal  liaison  with  the  CIA 
and  all  the  other  intelligence  units  in  the  Government  because  of  a 
disagreement  with  the  CIA  on  a  question  of  source  disclosure  (the 
Thomas  Riha  case).^^ 

Liaison  with  foreign  intelligence  services  overseas  can  undergo 
strain,  too.  As  one  CI  specialist  has  said :  "There  are  no  friendly  serv- 
ices; there  are  services  of  friendly  foreign  powers."  ^^  Each  service 
fears  the  other  has  been  infiltrated  by  hostile  agents  and  is  reluctant 
to  see  national  secrets  go  outside  its  own  vaults.  Nonetheless,  coopera- 
tion does  take  place,  since  all  intelligence  services  seek  information  and, 
with  precautions,  will  take  it  Avhere  they  can  get  it  if  it  is  useful. 

The  CIA  will  work  with  friendly  services  to  uncover  hostile  intel- 
ligence operations,  including  illegals,  directed  at  the  government  of 
the  friendly  service.  For  example,  a  CIA-recruited  defector  may  re- 
veal Soviet  agents  in  a  friendly  foi-eign  government.  This  information 
is  shared  with  the  friendly  government,  if  there  is  proper  protection 
of  the  source.  Protection  of  the  CIA  source  is  paramount. 

FBI  counterespionage  activities  within  the  United  States  are  super- 
vised by  the  Counterintelligence  l^ranch  of  the  FBI  Intelligence  Di- 
vision. The  Branch  is  made  up  of  four  Sections,  three  of  which  direct 
field  operations  conducted  by  the  Bureau's  field  offices.  The  fouith 
handles  liaison  with  other  agencies  and  supervises  the  FBI's  Legal 
Attaches  assigned  to  serve  in  the  embassies  in  several  foreign  countries. 

The  formal  structure  foi'  counterespionage  coordination  between  the 
FBI  and  the  military  intelligence  agencies  was  established  in  1939 
and  embodied  most  recently  in  a  "charter"  for  the  Interdepartmental 
Intelligence  Conference  in  1964.^"''  This  formal  body,  chaired  by  the 
FBI  Director  and  including  the  heads  of  the  military  intelligence 
agencies,  has  not  played  a  significant  decisionmaking  role  in  recent 
years. 


-*  Staff  summary  of  interview,  former  FBI  liaison  person  with  CIA,  8/22/75. 

"  Rocea  deposition,  11/25/75,  p.  43. 

'""  Confidential  memorandum  from  President  Roosevelt  to  Department  Heads, 
6/26/39;  memorandum  from  Attorney  General  Kennedy  to  .7.  Edgar  Hoover, 
Chairman,  Interdepartmental  Intelligence  Conference,  3/5/64. 


171 

As  late  as  1974,  some  FBI  officials  took  the  position  that  the  Bu- 
reau's counterespionage  activities  were  not  under  the  authority  of 
the  Attorney  General,  since  the  FBI  was  accountable  in  this  area 
directly  to  the  United  States  Intelligence  Board  and  the  National 
Security  Council.  A  Justice  Department  committee  chaired  by  As- 
sistant Attorney  General  Henry  Petersen  sharply  rejected  this  view 
and  declared : 

There  can  be  no  doubt  that  in  the  area  of  foreign  counter- 
intelligence, as  in  all  its  other  functions,  the  FBI  is  subject 
to  the  power  and  authority  of  the  Attorney  General.-^" 

In  recent  years  the  FBI  has  taken  steps  to  upgrade  its  counter- 
espionage effort,  which  had  been  neglected  because  of  the  higher 
priority  given  to  domestic  intelligence  in  the  late  60s  and  early  70s.^'*^ 
New  career  development  and  mid-career  training  programs  have  been 
instituted.  FBI  agents  specializing  in  counterespionage  begin  their 
careers  as  criminal  investigators  and  not  as  analysts;  and  Bureau 
officials  stress  that  their  role  is  accurate  fact-finding,  rather  than 
evaluation.  Nevertheless,  counterespionage  supervisory  personnel  have 
recently  attended  high-level  training  courses  in  foreign  affairs  and  area 
studies  outside  the  Bureau.^""^ 

Here,  then,  are  the  key  elements  of  counterintelligence.  Together 
they  combine  into  a  discipline  of  great  importance,  for  the  rock  bottom 
obligation  of  an  intelligence  service  is  to  defend  the  country ;  meeting 
this  obligation  is  the  very  raison  dJ'etre  of  counterintelligence.  The 
discipline  also  represents  the  most  secret  of  secret  intelligence  ac- 
tivities— the  heart  of  the  onion.  Its  great  importance  and  its  ultra 
secrecy  make  counterintelligence  an  area  of  concern  that  cannot  be 
ignored  by  policymakers  and  by  those  responsible  for  legislative  over- 
sight. As  a  review  of  current  issues  in  CI  attests,  the  discipline  has 
several  problems  which  demand  the  attention  of  those  charged  with 
the  defense  of  the  country  and  the  reform  of  the  intelligence 
community. 

B.  Current  Issues  in  Counterintelligence 

1.  Two  Philosophies 

December  1974  marked  the  end  of  an  era  in  CIA  counterintelli- 
gence. James  Angleton,  the  Chief  of  Counterintelligence  at  the  Central 
Intelligence  Agency  since  1954,  retired  over  differences  of  opinion  with 
Director  William  Colby  on  the  proper  approach  to  the  practice  of 
counterintelligence. 

The  new  regime  proved  to  be  considerably  different  in  its  approach 
to  counterintelligence,  emphasizing  a  diffusion  of  CI  responsibili- 


^"  Report  of  the  Petersen  Committee  on  COINTELPRO,  pp.  34-35.  The  com- 
mittee was  especially  concerned  that  the  ad  hoc  equivalent  of  the  U.S.  Intelli- 
gence Board  had  approved  the  discredited  "Huston  Plan"  in  1970.  However,  the 
committee  complied  with  the  FBI's  request  that  it  exclude  from  it.?  review  of 
domestic  COINTELPRO  activities  the  Bureau's  "extremely  sensitive  foreign 
intelligence  collection  techniques."  (Memorandum  from  FBI  Director  Kelley  to 
Acting  Attorney  General  Robert  Bork,  12/11/73.) 

^'  C.  D.  Brennan  testimony,  Hearings,  Vol.  2,  p.  117. 

""^  W.  R.  Wannall  testimony,  1/21/76,  pp.  18-22. 


172 

ties  throughout  the  Operations  Directorate.  Presumably,  this  has 
led  to  an  increased  flow  of  counterintelligence  information  within  the 
Agency  but,  at  the  same  time,  has  raised  questions  concerning  com- 
partmentation  and  security. 

The  new  Chief  of  CIA  Counterintelligence  has  instituted  a  series 
of  specific  changes  which  have  been  studied  closely  by  the  Select 
Committee.  The  findings  are  of  an  extremely  sensitive  character  and 
have  been  reported  to  the  Senate  and  to  the  President  in  a  classified 
form.  It  should  be  noted  here  that  CIA  counterintelligence  is  now  em- 
phasizing different  factors  than  heretofore,  which  reflect  a  some- 
what different  philosophy  than  that  espoused  by  Angleton.  These  dif- 
erences  in  viewpoint  raise  several  important  questions  concerning  how 
best  to  protect  the  United  States,  including  the  proper  degree  of  com- 
partmentation  of  CI  information,  methods  of  operation,  approaches 
to  security,  research  priorities,  extent  of  liaison  cooperation,  and 
emphasis  on  deception  activities,  among  other  things. 

A  high-level  executive  branch  review  of  the  classified  issues  which 
have  surfaced  in  this  disagreement  is  of  considerable  importance.  In- 
cluded in  this  review  should  be  an  examination  of  the  approval  proc- 
ess for  certain  counterespionage  operations. 

2.  Interagency  Relations 

Equally  as  troubling  as  these  issues  is  the  problem  of  CIA/CI  rela- 
tions with  other  counterintelligence  units  in  the  Government.  Partic- 
ularly vexing  have  been  the  on-again  off-again  liaison  ties  between  the 
Agency  and  the  FBI.^^  This  histoiy  has  been  marked  by  turbulence, 
though  a  strong  undercurrent  of  cooperation  has  usually  existed  at 
the  staff  level  since  1952  (when  the  Bureau  began  sending  a  liaison 
man  to  the  CIA  on  a  regular  basis).  The  sources  of  friction  between 
the  CIA  and  the  FBI  in  the  early  days  revolved  around  such  matters 
as  the  frequent  unwillingness  of  the  Bureau  to  assist  the  CIA  within 
the  United  States  or  to  help  recruit  foreign  officials  in  this  country. 
Pressure  from  the  CIA  on  the  Bureau  to  increase  microphone  coverage 
of  foreign  targets  within  the  United  States  was  also  a  "red  flag"  to 
Hoover.^^ 

A  series  of  such  disagreements  punctuated  the  relations  between 
the  two  agencies  throughout  the  1950s  and  1960s.  Several  flaps  arose, 
for  example,  when  the  CIA  Domestic  Operations  Division  attempted 
to  recruit  foreign  officials  within  the  United  States  and  failed  to  ad- 
vise the  Bureau.^° 

In  1966  an  infoiTnal  agreement  w^as  negotiated  between  the  FBI  and 
the  CIA  to  regularize  their  "coordination."  This  agreement  had  as  its 
"heart"  that  the  CIA  would  "seek  concurrence  and  coordination  of  the 
FBI"  before  engaging  in  clandestine  activity  in  the  United  States,  and 
that  the  FBI  would  "concur  and  coordinate  if  the  proposed  action  does 
not  conflict  with  any  operation,  current  or  planned,  including  active 
investigation  [by]  the  FBI."  Moreover,  when  an  agent  recmited  by 
the  CIA  abroad  arrived  in  the  United  States,  the  FBI  would  "be 
advised"  and  the  two  agencies  would  "confer  regarding  the  handling 


*  Former  FBI  liaison  person  with  CIA  (staff  summary),  8/22/75. 
Ihid. 
'  Ihid. 


173 

of  the  agent  in  the  United  States,"  The  CIA  could  "continue"  its  "han- 
dling" of  the  agent  for  "foreign  intelligence"  purposes ;  and  the  FBI 
would  also  become  involved  where  there  were  "internal  security  fac- 
tors," although  it  was  recognized  that  CIA  might  continue  to  "handle" 
the  agent  in  the  United  States  and  provide  the  Bureau  with  "informa- 
tion"  bearing  on  "internal  security  matters."  ^°^' 

Eventually,  the  much  heralded  (though  actually  minor)  Riha  inci- 
dent in  1970  became  "the  straw  that  broke  the  camel's  back."  ^^  Hoover 
ordered  the  discontinuation  of  FBI  liaison  with  the  Central  Intelli- 
gence Agency.  Though  informal  means  of  communication  continued 
between  CIA  and  FBI  staff  personnel,  Hoover's  decision  was  a  set- 
back to  the  coordination  of  counterintelligence  activities  in  the  Gov- 
ernment, Not  until  Hoover  was  gone  from  the  Bureau  did  formal 
liaison  relations  begin  to  improve.^^ 

Today,  most  counterintelligence  officers  in  both  agencies  say  that 
coordination  and  communication  linkages  are  good,  though  a  recently 
retired  CIA/CI  officer  points  to  "a  vital  need  for  closer  integi-ation 
of  the  CI  efforts  of  the  CIA  and  the  FBI."  ^^  The  most  salient  criti- 
cisms of  FBI  counterintelligence  voiced  at  the  CIA  concern  (1)  the 
lack  of  sufficient  CI  manpower  in  the  FBI;  (2)  occasional  disputes 
over  the  bona  fides  of  defectors:  and,  (3)  differences  of  opinion  on 
the  possibility  of  hostile  penetrations  within  the  Government.  Each 
of  these  matters  also  requires  immediate  review  by  the  executive 
branch.  In  particular,  the  occasional  interagency  disputes  over  de- 
fector bona  fides  and  differences  of  opinion  on  suspected  hostile  pene- 
trations cry  out  for  a  higher  level  of  authority  in  the  executive  branch 
to  settle  these  sometimes  divisive  disagreements. 

•5.  The  jScope  and  Bams  of  FBI  Counterintelligence 

In  the  imperfect  contemporary  Avorld  where  other  nations  have 
interests  which  conflict  with  those  of  the  United  States,  foreign- 
directed  clandestine  intelligence  activities  in  this  country  must  be  of 
constant  concern  to  the  American  people.  One  of  the  original  reasons 
for  the  FBI's  domestic  intelligence  mission  was  that  the  United  States 
needed  in  the  late  1930s  a  coordinated  program  for  investigating  "per- 
sons engaged  in  espionage,  counter-espionage  or  sabotage."  ^^  By  mid- 
1939  the  FBI  and  military  intelligence  had  gathered  a  "reservoir  of 
information  concerning  foreign  agencies  operating  in  the  United 
States"  with  efficient  "channels  for  the  exchange  of  information."  ^^ 
There  is  no  question  that  during  this  prewar  period,  foreign  espionage 
constituted  a  serious  threat  to  the  security  of  the  United  States  and 
thus  supported  the  basic  decision  to  conduct  investigations  of  activities 
which  were  "not  within  the  specific  provisions  of  prevailing  statutes"  ^® 


^"^  Testimony  of  former  FBI  liaison  person  with  CIA,  9/22/75,  pp.  52-55. 

^  .Tames  Angleton  testimony,  9/24/75,  Hearings,  pp.  657-58. 

^  Scott  Miller  testimony,  the  Commission  on  CIA  Activities  Within  the  United 
States,  3/19/75,  p.  938. 

*•  Statement  from  Scott  Miler  to  the  Senate  Select  Committee,  1/28/76,  pp. 
32^33. 

^  Memorandum  from  J.  Edgar  Hoover  to  Attorney  General  Murphy,  3/16/39. 

^  Ijetter  from  Attorney  General  Murphy  to  President  Roosevelt,  6/17/39. 

**  Memorandum  from  Hoover  to  Murphy,  3/16/39. 


174 

but  which  involved  "potential"  espionage,  counterespionage,  or  sabo- 
tage.^" 

One  of  the  major  difficulties  in  any  attempt  to  base  investigations 
of  foreign  espionage  on  the  criminal  statutes  has  been,  from  the  outset, 
the  restricted  and  sometimes  contradictory  scope  of  the  laws.  A  recent 
legal  analysis  has  observed  that  "the  legislation  is  in  many  ways  in- 
comprehensible." ^*  Most  notably,  the  espionage  statutes  do  not  make 
it  a  crime  simply  to  engage  in  the  knowing  and  unauthorized  transfer 
of  classified  information  to  foreign  agents.^^  Moreover,  the  statutes 
do  not  extend  to  a  range  of  privately  held  information,  especially  on 
scientific  and  technical  matters,  which  would  be  valuable  to  a  foreign 
power. 

Hostile  foreign  intelligence  activities  include  more  than  just  look- 
ing for  classified  information  or  espionage  recruits.  Information  of  a 
highly  technical  and  strategic  nature  (though  unclassified),  which  is 
normally  restricted  or  unavailable  in  other  societies,  is  openly 
procurable  in  the  United  States  through  academic  institutions,  trade 
associations,  and  government  offices.  Intelligence  officers  may  seek  out 
persons  who  have  defected  to  the  United  States,  to  induce  them  to 
redefect  back  to  their  home  country .^°  Foreign  intelligence  targets  in 
this  country  may  include  information  possessed  by  third  nations  and 
their  representatives  in  the  United  States. 

Moreover,  the  type  of  activity  w^hicli  is  most  easy  to  detect  and  which 
may  indicate  possible  espionage  does  not  always  satisfy  the  normal 
standard  of  "reasonable  suspicion."  As  a  study  prepared  by  the  Fund 
for  the  Republic  stated  twenty  years  ago : 

The  problems  of  crime  detection  in  combatting  espionage  are 
not  ordinary  ones.  Espionage  is  a  crime  which  succeeds  only 
b}^  secrecy.  Moreover-,  spies  work  not  for  themselves  or 
privately  organized  crime  "syndicates,"  but  as  agents  of  na- 
tional states.  Their  activities  are  therefore  likely  to  be  care- 
fully planned,  highly  organized,  and  carried  on  by  techniques 
skillfully  designed  to  prevent  detection.*^ 

Consequently,  espionage  investigations  must  be  initiated  on  the  basis 
of  fragments  of  information,  especially  where  there  may  be  only  an 
indication  of  a  suspicious  contact  with  a  foreign  agent  and  limited 
data  as  to  the  specific  purposes  of  the  contact. 

In  addition,  prosecution  is  frequently  not  the  objective  of  an  espi- 
onage investigation.  For  one  thing,  the  government  may  desire  "to 


'''  Directive  of  President  Roosevelt,  6/26/39.  While  the  FBI's  responsibilities 
were  also  described  at  times  as  extending  to  "subversion,"  and  the  lack  of  outside 
guidance  allowed  for  overly  broad  FBI  investigations,  the  problem  of  spying 
was  always  paramount.  See  the  orders  of  President  Roosevelt  and  Attorney 
General  Biddle  regarding  warrantless  wiretapping,  discussed  in  report  on  war- 
rantless FBI  Electronic  Surveillance. 

^  Harold  Edgar  and  Benno  C.  Schmidt,  "The  Espionage  Statutes  and  Publica- 
tion of  Defense  Information."  Coliimhia  Law  Review,  Vol.  .53,  (Mav.  1{>73)  pp. 
929.  9.34. 

^^  Ibid.,  p.  1084. 

*"  FBI  Memorandum,  "Intelligence  Activities  Within  the  United  States  by  For- 
eign Governments,"  3/20/75. 

"  Fund  for  the  Republic,  Digest  of  the  Puhlic  Record  of  Communism  in  the 
United  States  (New  York,  1955) ,  p.  29. 


175 

avoid  exposino:  its  own  coiinterespiona;gre  practices  and  informa- 
tion." *^  In  addition,  the  purpose  of  the  investigation  may  be  to  find 
out  what  a  known  foreign  agent  is  looking  for,  both  as  an  indication 
of  the  espionage  interest  of  the  foreign  country  and  as  a  means  of 
insuring  that  the  agent  is  not  on  the  track  of  vital  information.  Since 
foreign  agents  are  replaceable,  it  may  be  a  better  defense  not  to  expel 
them  from  the  country  or  otherwise  halt  their  activities,  but  rather  to 
maintain  a  constant  watch  on  their  operations.  This  also  means  in- 
vestigating in  a  more  limited  fashion  many  of  the  Americans  with 
whom  the  foreign  agent  associates,  in  order  to  determine  what  the 
agent  may  be  interested  in  learning  from  them. 

In  the  19-^Os  and  1940s,  another  argument  for  going  beyond  the 
criminal  statutes  was  that  there  were  significant  ideological  and  na- 
tionality factors  which  motivated  persons  to  engage  in  espionage.  As 
Attorney  General  Jackson  put  it  in  1940,  individuals  were  a  "likely 
source"  of  law  violation  because  they  w^ere  "sympathetic  with  the  sys- 
tems or  designs  of  foreign  dictators."  ^^  The  1946  Report  of  the  Cana- 
dian Royal  Commission  made  similar  findings.  This  was  the  most 
pereuasive  rationale  for  continuing  FBI  intelligence  investigations 
of  Communists  and  Fascists,  as  well  as  German  and  other  nationality 
groups,  before  World  War  II.  It  continued  to  be  a  substantial  basis 
for  such  investigations  of  Commimists  after  the  war.** 

By  the  mid-fifties,  however,  the  characteristics  of  foreign  espionage 
had  changed  substantially.  The  decline  of  the  Communist  Party  caused 
a  shrinkage  in  possible  recruits,  with  the  result  that  Soviet  in- 
telligence reverted  "more  and  more  ...  to  the  old  type  of  conven- 
tional spy."  *^  A  report  prepared  by  the  Association  of  the  Bar  of  the 
City  of  New  York  observed  that  it  was  "vital"  to  adjust  the  govern- 
ment's security  programs  to  "new  conditions,"  one  of  which  w^as  the 
"decline  of  the  appeal  of  Communism."  The  report  added : 

In  the  1930s  and  1940s  the  Soviet  Union  could  rely  on  the 
support,  of  a  small  but  substantial  group  in  this  country  who 
were  sympathetic  with  its  asserted  aims.  Now  this  has  largely 
changed.  .  .  .  This  has  made  a  radical  change  in  the  type  and 
number  of  persons  who  might  be  lured  into  Communist 
espionage.*'' 

The  FBI  itself  believed  that  the  Community  Party  had  become  a 
"potential"  rather  than  an  actual  espionage  danger.*^  While  that 


*^  Ibid. 

*^  Proceedings  of  the  Federal-State  Conference  on  Law  Enforcement  Problems 
of  National  Defense,  8/.5-6/40. 

**  "A  characteristic  of  most  of  the  cases  in  which  espionage  for  the  Soviet 
Union  has  been  prosecuted  is  that  the  participants  seem  to  have  been  motivated 
by  ideology.  .  .  ."  Fund  for  the  Republic,  Digest  of  the  Public  Record  of  Com- 
munism in  the  Ignited  States,  p.  29. 

*°  Alexander  Dallin,  Soviet  Espionage  ( New  Haven :  Yale  University  Press, 
1955),  p.  510.  This  authoritative  study  of  Communist  espionage  added  that  "the 
traditional  type  of  nonpolitical  spy  has  advantages  over  a  Communist :  his  past 
evokes  no  suspicion." 

"Report  of  the  Special  Committee  on  the  Federal  Loyalty-Security  Program 
of  the  Association  of  the  Bar  of  the  City  of  New  York  ( New  York :  Dodd,  Mead 
&Co.,  1956),  pp.  35-36. 

*''FBI  Monograph,  "The  Communist  Menace  in  the  United  States  Today," 
(19.55),  p.  (iv-v.) 


176 

potential  threat  was  still  significant,  in  view  of  the  Party's  subser- 
vience to  the  Soviet  Union,  the  counterespionage  justification  for 
sweeping  investigations  of  persons  one  or  two  steps  removed  from 
the  Party  (e.g.,  "sympathizers"  or  "infiltrated"  groups)  lost  much  of 
its  force. 

Nevertheless,  there  continue  to  be  hostile  foreign  intelligence  ac- 
tivities which  the  FBI  characterizes  as  "efforts  to  penetrate  the  Ameri- 
can political  system"  or  attempts  "to  develop  an  agent  of  influence  in 
American  politics"  or  efforts  "to  influence  the  U.S.  policy-making 
structure."  "^^ 

Therefore,  the  monitoring  of  contacts  between  U.S.  government  of- 
ficials and  foreign  officials  who  are  likely  to  be  carrying  out  the  direc- 
tions of  a  hostile  foreign  intelligence  service  is  a  necessary  part  of 
the  FBI's  investigative  duties.  The  subject  of  investigation  is  the  for- 
eign official,  and  any  inquiry  directed  towards  the  American  official 
can  be  limited  to  determining  the  nature  of  the  foreign  official's  in- 
terests. Frequently  it  is  desirable  that  the  American  official  be  in- 
formed by  the  Bureau,  especially  when  the  contact  is  overt  rather 
than  furtive  or  clandestine.  (The  same  is  also  true  with  respect  to 
overt  contacts  with  American  private  citizens.)  ^'■' 

There  lare  two  areas  of  special  difficulty  in  prescribing  the  FBI's 
proper  responsibility.  The  first  involves  contacts  between  Members  of 
Congress  or  high-level  executive  officials  and  equally  high-level  for- 
eign officials.  There  have  been  ins^tances  where  the  FBI  has  had  reason 
to  believe  that  such  contacts  might  involve  the  unauthorized  disclosure 
of  confidential  information  to  a  foreign  government.  Except  in  such 
rare  circumstances,  however,  contacts  of  this  nature  need  not  be  the 
subject  of  FBI  investigation  or  dissemination. ^° 

The  second  difficulty  involves  the  concept  "foreign  subversion,"  used 
most  recently  in  President  Ford's  Executive  Order  defining  the  coun- 
terintelligence duties  of  the  U.S.  intelligence  community,  including 
the  FBI.^^  As  noted  above,  the  Bureau  characterizes  certain  hostile 
foreign  intelligence  activities  as  attempts  to  develop  "agents  of  influ- 
ence in  American  politics."  The"  FBI  considered  one  of  Dr.  Martin 
Luther  King's  advisors  to  be  such  an  "agent  of  influence."  In  this  case, 
as  with  the  massive  investigations  to  uncover  jwssible  foreign  "influ- 
ence" on  domestic  protest  activities,  the  concern  for  "foreign  subver- 
sion" was  distorted  so  far  beyond  reasonable  definition  that  the  term 
"subversion"  should  be  abandoned  completely.  Even  with  the  qualifier 
"foreign,"  the  concept  is  so  elastic  as  to  be  susceptible  to  future  misuse. 

Nevertheless,  there  remains  a  compelling  need  to  investigate  aJJ  the 
activities  of  hostile  foreign  intelligence  services,  including  their  efforts 
to  recniit  "agents  of  influence."  This  can  be  accomplished  by  continu- 
ing investigation  of  the  foreign  agents  themselves.  Where  a  foreign 

'^  FBI  Memorandum,  "Intelligence  Activities  Within  the  United  States  by 
Foreign  Governments,"  3/20/75. 

^*  Contacts  made  secretly  or  with  the  apparent  intent  to  avoid  detection  justify 
more  extensive  iuAestigation. 

™  Where  the  FBI  discovers  such  contacts  as  a  by-product  of  its  investigations 
for  other  purjKXses,  they  can  be  notetl  without  reference  to  the  identity  of  the  U.S. 
official  in  order  to  compile  a  quantitative  measure  of  foreign  activity. 

"^  Executive  Order  11905,  "United  States  Foreign  Intelligence  Activities,"  Sec. 
2(a)(2)  :  Sec.  4(b)(4)  ;  Sec.  4(g)  (1),  2/18/76. 


177 

agent  makes  an  overt  contact  with  an  American,  a  limited  inquiry 
regarding  the  American  is  appropriaite  to  deter-mine  the  rrature  of  the 
foreigrr  agent's  interests.  This  applies  whether  the  agent's  interest  is 
infor-mation  or  "influence,"  and  the  Bureau  cair  frequently  make  its 
inquiry  known  to  the  Airrerican.  But  the  Bureau's  objectives  should  be 
c-onfined  solely  to  learrring  more  about  the  overall  mission  of  the  hostile 
ser*vice  and  tire  par-ticular  assigmnents  of  its  officers,  as  opposed  to 
investigatiirg  "influerrce"  by  foreign  officials  or  agerrts  who  do  rrot  have 
irrtelligeirce  duties  and  the  lawful  activities  of  Americarrs  who  are  not 
foreigrr  agerrts.  There  is  rro  compellirrg  reasorr  for  irrterrsive  irrvestiga- 
tions  of  U.S.  officials  (or  private  citizerrs)  simply  becarrse  they  are 
targets  of  foreigrr  "'influerrce."  The  lirre  must  be  tightly  dr'awn  so  that 
FBI  courrter-intelligerrce  irrvestigatiorrs  do  rrot  therrrselves  once  agairr 
irrtrrrde  irrto  the  Airrericarr  political  process,  with  corrsequerrces  darrrag- 
ing  not  oirly  to  the  rights  of  Americarrs,  but  also  to  public  confiderrce 
irr  the  Burearr.  Citizerr  cooperation  with  the  FBI  is  esserrtial  to  its  suc- 
cess in  detectirrg  arrd  corrntering  the  threat  of  hostile  foreigrr  intelli- 
gence  operutiorrs  to  the  defense  of  the  nation. 

To  achieve  this  end,  the  federal  criminal  statutes  dealing  with 
espiorrage  should  be  substarrtially  revised  to  take  accourrt  of  the  con- 
temporary counterintelligence  responsibilities  of  the  FBI.  A  realistic 
defirrition  of  foreign-directed  clandestine  intelligerrce  activity  would 
make  it  possible  for  the  FBI  to  base  its  couirterirrtelligence  mvestiga- 
tiorrs  orr  the  firm  foundation  of  the  criminal  law,  rather  than  the  shift- 
irrg  interpretatiorrs  of  terms  like  "subversiorr"  in  executive  orders.  The 
Conrmittee  agrees  with  Attorney  General  Edward  H.  Levi  that: 

the  fact  that  the  FBI  has  criminal  investigative  responsi- 
bilities, which  must  be  conducted  within  the  confines  of  con- 
stitutiorral  protections  strictly  errforced  by  the  courts,  gives 
the  organization  an  awareness  of  the  interests  of  individual 
liberties  that  might  be  missing  in  an  agerrcy  devoted  solely  to 
intelligence  work.^^ 

C.  Conclusions 

1.  A  Subcommittee  on  Counterintelligence  should  be  established 
within  the  framework  of  the  National  Security  Council  (NSC).  Its 
prrrpose  would  be  to  monitor  CI  activities,  authorize  important 
courrterespionage  operations,  and  adjudicate  interagerrcy  disagree- 
ments over  CI  policies,  coordination,  defector  bona  fides,  suspected 
hostile  penetrations,  and  related  matters. 

2.  The  President  of  the  United  States,  in  consultation  with  the 
oversight  committee  (s)  of  Congress,  should  undertake  a  top  secret 
review  of  current  issues  iir  the  realm  of  counterintelligence.  This  re- 
view, which  should  form  the  basis  for  an  internal  Presidential  state- 
merrt  on  rrational  counterintelligence  policy  arrd  objectives,  should 
iirclude  close  attention  to  the  followirrg  issrres:  compartmerrtation, 
operations,  security,  research,  accountability,  trairrirrg,  interrral  review, 
deceptiorr,  liaisorr  and  coordination,  and  mairpower. 

8.  Corrgressional  oversight  should  devote  more  atterrtiorr  to  this 

""  Levi  testimony,  12/10/75,  Hearings,  Vol.  6,  pp.  314-315. 


178 

area  to  help  preserve  the  liberties  of  American  citizens  and  to  prod 
the  intelligence  community  toward  a  more  effective  defense  of  the 
nation. 

(Additional  recommendations  on  counterintelligence,  including 
reform  of  the  espionage  laws  and  legislation  setting  standards  for 
activities  affecting  the  rights  of  Americans,  are  made  in  the  Commit- 
tee's Report  on  Intelligence  Activities  and  the  Rights  of  Americans.) 


X.  THE  DOMESTIC  IMPACT  OF  FOREIGN  CLANDESTINE 
OPERATIONS:  THE  CIA  AND  ACADEMIC  INSTITU- 
TIONS, THE  MEDIA,  AND  RELIGIOUS  INSTITUTIONS 

Although  its  operational  arena  is  outside  the  United  States,  CIA 
clandestine  operations  make  use  of  American  citizens  as  individuals 
or  through  American  institutions.  Clandestine  activities  that  touch 
American  institutions  and  individuals  have  taken  many  forms  and  are 
effected  through  a  wide  variety  of  means :  university  officials  and  pro- 
fessors -provide  leads  and  make  introductions  for  intelJigence  pur- 
poses; ^  scholars  and  journalists  collect  intelligence;  journalists  devise 
and  place  propaganda;  United  States  publications  provide  cover  for 
CIA  agents  overseas. 

These  forms  of  clandestine  cooperation  had  tlieir  origins  in  the  early 
Cold  War  period  when  most  Americans  perceived  a  real  threat  of  a 
communist  imperium  and  were  prepared  to  assist  their  government 
to  counter  that  threat.  As  the  communists  pressed  to  influence  and  to 
control  international  organizations  and  movements,  mass  communica- 
tions, and  cultural  institutions,  the  United  States  responded  by  in- 
volving American  private  institutions  and  individuals  in  the  secret 
struggle  over  minds,  institutions  and  ideas.  Over  time  national  per- 
ceptions would  change  as  to  the  nature  and  seriousness  of  the  com- 
munist ideological  and  institutional  threat.  Time  and  experience  would 
also  give  increasing  currency  to  doubts  as  to  whether  it  made  sense  for 
■a  democracy  to  resort  to  practices  such  as  the  clandestine  use  of  free 
American  institutions  and  individuals — practices  that  tended  to  blur 
the  very  difference  'bet^veen  "our"  system  and  "theirs"  that  these 
covert  programs  were  designed  to  preserve. 

These  covert  relationsliips  have  attracted  public  concern  and  the 
attention  of  this  Committee  because  of  the  importance  Americans 
attach  to  the  independence  of  private  institutions.  Americans  recognize 
that  insofar  as  univereities,  newspapei-s,  and  religious  groups  help 
mold  the  beliefs  of  the  i:)ulblic  and  the  policymakers,  their  divei"sity 
and  legitimacy  must  be  rigorously  protected.  It  is  through  them  that 
a  society  informs  and  criticizes  itself,  educates  its  yomig,  interprets 
its  history,  and  sets  new  goals. 

At  the  same  time,  Americans  also  recognize  the  legitimacy  and 
necessity  of  certain  clandestine  operations,  particularly  the  collection 
of  foreign  intelligence.  To  conclude  that  certain  sectore  of  American 
life  must  be  placed  "off  limits"  to  clandestine  operations  inevitably 
raises  questions  not  only  on  possible  intelligence  loSvSes  which  would 
result  from  such  a  prohibition,  but  on  whether  the  United  States  can 


^The  material  italicized  in  this  report  has  been  substantially  abridge  at  the 
request  of  the  executive  agencies.  The  classified  version  of  this  material  is  avail- 
able to  members  of  the  Senate  under  the  provisions  of  Senate  Resolution  21  and 
the  Standing  Rules  of  the  Senate.  See  also  p.  IX. 

(179) 


180 

afford  to  foreoo  the  clandestine  use  of  our  universities,  our  media,  and 
our  religious  groups  in  competing-  with  our  adversaries. 

In  exploring  this  problem  the  Committee  has  given  special  atten- 
tion to  the  CIA's  past  clandestine  relationships  with  American  institu- 
tions. The  Committee  has  examined  the  past  to  illuminate  the  attitudes 
and  perceptions  that  shaped  these  clandestine  programs  using  Amer- 
ican institutions  and  to  determine  whether  tJie  internal  CIA  regula- 
tions established  in  1967  are  sufficient  to  prevent  the  large  scale  pro- 
grams of  the  past  from  being  reinstated  in  the  future. 

Some  of  these  concerns  were  addressed  almost  a  decade  ago  during 
an  investigation  that  proved  to  'be  a  watershed  in  the  Central  Intelli- 
gence Agency's  relationship  to  Amencan  institutions.  President 
Lyndon  Johnson,  moved  by  public  and  congressional  uproar  over  the 
1967  disclosure  of  the  CIA's  covert  funding  of  the  National  Student 
Association  (NSA)  and  other  domestic,  private  institutions,  estiablished 
the  Katzenbach  Committee.  The  Committee,  chaired  by  the  then  Under 
Secretai-y  of  State,  Nicholas  Katzenbach,  directed  its  investigation 
primarily  at  the  CIA's  covert  funding  of  American  educational  and 
private  voluntary  organizations.  The  recommendations  of  the  Katzen- 
bach Committee,  although  they  had  great  impact  on  the  CIA's  opera- 
tions, spoke  only  to  the  issue  of  tlie  covert  funding  of  institutions. 

In  its  investigation  the  Committee  has  looked  not  only  at  the  impact 
of  foreign  clandestine  operations  on  American  institutions  but  has 
focused  particular  attention  on  the  covert,  use  of  individuals.  It  should 
be  emphasized  from  the  outset  that  the  integrity  of  these  institutions 
or  individuals  is  not  jeopardized  by  open  contact  or  cooperation 
with  Government  intelligence  institutions.  United  States  Govern- 
ment support  and  cooperation,  openly  acknowledged,  plays  an  essen- 
tial role  in  American  education.  Equally  important.  Government  pol- 
icymakers draw  on  the  technical  expertise  and  advice  available  fi*om 
academic  consultants  and  university-relaJted  research  organizations. 
Open  and  regular  contact  with  Government  agencies  is  a  necessary 
part  of  the  journalist's  responsibility,  as  well. 

A  secret  or  a  covert  relationship  with  any  of  these  institutions,  how- 
ever, is  another  matter,  and  requires  careful  evaluation,  given  the 
critical  role  these  institutions  play  in  maintaining  the  freedom  of  our 
society.  In  approaching  the  subject  the  Committee  has  inquired :  Are 
the  independence  and  integrity  of  American  institutions  in  any  way 
endangered  by  clandestine  relationships  with  the  Central  Intelligence 
Agency?  Should  clandestine  use  of  institutions  or  individuals  within 
those  ins'titutions  be  pennitted?  If  not,  should  there  be  explicit  guide- 
lines  laid  down  to  regidate  Government  clandestine  support  or  opera- 
tional use  of  such  institutions  or  individuals  ?  Should  such  giiidelines 
be  in  the  form  of  executive  directives  or  by  statute? 

In  addressing  these  issues,  the  Committee's  access  to  CIA  documents 
and  files  varied  with  the  subject  matter.  In  reviewing  the  clandestine 
activities  that  proceeded  the  Katzenbach  Committee  inquiry  of  1967. 
the  Select  Committee  had  full  and  unfettered  access  to  most  files  and 
documentation,  with  the  single  exception  of  records  on  media  rela- 
tionships. In  addition,  the  Committee  took  extensive  sworn  testimony 
from  virtually  all  of  those  involved  in  the  management  and  review^  of 
the  pre-1967  projects.  Access  to  post-1967  material  was  far  more  re- 


181 

stricted:  certain  of  die  titles  and  names  of  authors  of  propaganda 
books  published  after  1967  were  denied  the  Committee ;  access  to  files 
on  the  oontempoiury  clandestine  use  of  the  American  academic  com- 
munity was  restricted  'to  infonnation  which  would  provide  the  num- 
bers of  institutions  and  individuals  involved  and  a  description  of  the 
role  of  the  individuals.  As  for  the  media  and  relationships  with  re- 
ligious groups,  the  Committee  inspected  precis  or  summaries  of  all 
operational  relationships  since  1951  and  then  selected  over  20  cases  for 
closer  inspection.  The  documents  fix)m  these  some  20  files  were  selected 
and  screened  by  the  Agency  and,  by  mutual  agreement,  names  of  indi- 
viduals and  institutions  were  removed. 

Therefore,  the  CcMnmittee  has  far  from  the  full  picture  of  the  nature 
and  exifent  of  these  relationships  and  the  domestic  impact  of  foreign 
clandestine  operations.  Nevertheless,  it  has  enough  to  outline  the 
dimensions  of  the  problem  and  to  underscore  its  serious  nature.  The 
conclusions  and  reconmiendations  must  necessarily  be  considered 
tentative  and  subject  to  careful  review  by  the  successor  intelligence 
oversight  committee  (s)  of  the  Congress. 

In  presenting  the  facts  and  issues  associated  with  CIA  covert  rela- 
tions with  TTnited  St)ates  private  institutions,  this  report  is  organized 
as  follows :  I.  Covert  Use  of  Academic  and  Voluntary  Organizations. 
11.  Covert  Relationships  with  the  United  States  Media.  III.  Covert 
ITse  of  United  States  Religious  Groups. 

A.  Covert  Use  of  Academic  and  Voluntary  Organizations 

The  Central  Intelligence  Agency  has  long- developed  clandestine 
relationships  with  the  American  academic  community,  which  range 
from,  academics  making  introducti(y)\8  for  intelligence  purfoses  -  to 
intelligence  collection  while  abroad,  to  academic  research  and  writing 
where  CIA  sponsorship  is  hidden.  The  Agency  has  funded  the  activi- 
ties of  American  private  organizations  around  the  world  when  those 
activities  suppoi^ted — or  could  be  convinced  to  suppoit — American 
foreign  policy  objectives.  Until  1967  the  Agency  also  maintained 
covert  ties  to  iVmerican  foundations  in  order  to  pass  funds  secretly  to 
private  groups  ^vhose  work  the  CIA  supported. 

The  relationships  have  varied  according  to  whether  made  with  an 
institution  or  an  individual,  whether  the  relationship  is  paid  or  un- 
paid, or  whether  the  individuals  are  "witting" — i.e.  aware — of  CIA 
involvement.  In  some  cases,  covert  involvement  provided  the  CIA  with 
little  or  no  operational  control  of  the  institutions  involved ;  funding 
was  primarily  a  way  to  enable  people  'to  do  things  they  wanted  to  do. 
In  other  cases,  influence  was  exerted.  Nor  was  the  nature  of  these  re- 
lationships necessarily  static ;  in  the  case  of  some  individuals  support 
turned  into  influence,  and  finally  even  to  operational  use. 

During  the  1950s  and  1960s,  the  CIA  turned  increasingly  to  covert 
action  in  the  area  of  student  and  labor  matters,  cultural  affairs,  and 
community  developments.  The  struggle  with  communism  was  seen  to 
be,  at  center,  a  struggle  between  our  institutions  and  theirs.  The  CIA 
subsidized,  advised,  and  even  helped  develop  "private"  organizations 
that  would  compete  with  the  communists  around  the  world.  Some  of 

-  For  explanation  of  italics,  see  footnote,  p.  179. 


182 

these  organizations  were  foreign ;  others  were  international ;  yet  others 
were  U.S.-based  student,  labor,  cultural,  or  philanthropic  organiza- 
tions whose  international  activities  the  CIA  subsidized. 

The  CIA's  interest  in  the  areas  of  situdent  and  labor  matters,  cul- 
tural affairs,  and  community  development  reached  a  peak  in  the  mid- 
1960's.  By  1967,  when  public  disclosure  of  NSA's  funding  and  the  sub- 
sequent report  of  the  Katzenbach  Committee  caused  a  major  curtail- 
ment of  these  activities,  interest  in  the  major  covert  action  efforts  in 
these  areas  was  already  waning. 

There  appear  to  be  two  reasons  for  this.  First,  there  was  considerable 
skepticism  within  the  CIA  as  to  the  effectiveness  of  this  approach.  It 
differed  from  classical  CIA  "tradecraft"  in  that  the  organizations 
funded  were  basically  independent  from  CIA  control,  Richard  Helms 
expressed  this  skepticism  when  he  remarked  in  testimony  before  tliis 
committee. 

The  clandestine  operator  ...  is  trained  to  believe  that  you 
really  can't  count  on  the  honesty  of  your-  agent  to  do  exactly 
what  you  want  or  to  report  accurately  unless  you  own  him 
body  and  soul.^'' 

Mr.  Helms  contended  that  "the  clandestine  oj)erator  sneered  at  tlie 
other  kind  of  operation" — the  aiding  and  abetting  of  people  or  orga- 
nizations who  are  your  "friends"  or  "have  the  same  point  of  view  that 
you  do." 

Skepticism  of  the  clandestine  operators  was  directed  particularly 
at  the  Covert  Action  Staff/International  Organizations  Division,  the 
CIA  units  which  conducted  the  programs  in  the  area  of  student  and 
cultural  exchange.  Second,  it  became  increasingly  difficult  to  conceal 
the  CIA  funds  that  supported  these  activities  as  the  scale  of  the  opera- 
tions grew.  By  fiscal  year  1967,  for  example,  over  $3  million  was 
budgeted  for  youth  and  student  programs  and  $6  million  for  labor. 
Most  of  the  funds  were  transmitted  through  legitimate  or  "devised" 
foundations — that  is,  fictitious  entities  established  by  the  CIA. 

1.  CIA  Use  of  Private  Foundations^  Pre-1967 

The  use  of  pliilanthropic  organizations  was  a  convenient  way  to 
pass  funds,  in  that  large  amounts  could  be  transferred  rapidly,  and 
in  a  form  that  need  not  alert  unwitting  officers  of  the  recipient  organi- 
zations to  their  source.  In  addition,  foundation  grants  bestowed  upon 
the  recipient  the  apparent  "blessing"  of  the  foundation.  The  funding 
pattern  involved  a  mixture  of  bona  fide  charitable  foundations,  devised 
foundations  and  funds,  "front  men"  drawn  from  a  list  of  America's 
most  prominent  citizens,  and  lawyers  representing  undisclosed  clients. 

The  CIA's  intrusion  into  the  foundation  field  in  the  1960s  can  only 
be  described  as  massive.  Excluding  grants  from  the  "Big  Three" — 
Ford,  Rockefeller,  and  Carnegie — of  tlie  700  grants  over  $10,000  given 
by  164  other  foundations  during  the  period  1963-1966,  at  least  108 
involved  partial  or  complete  CIA  funding.  More  importantly,  CIA 
funding  was  involved  in  nearly  half  the  grants  the  non-"Big  Three" 
foundations  made  during  this  period  in  the  field  of  international 
activities.  In  the  same  period  more  than  one-third  of  the  grants 
awarded  by  non-"Big  Three"  in  the  physical,  life  and  social  sciences 
also  involved  CIA  funds. 


""  Richard  Helms  testimony,  9/12/75,  p.  2.")-26. 


183 

Bona  fide  foundations,  rather  than  those  controlled  by  the  CIA, 
were  considered  the  best  and  most  plausible  kind  of  funding  cover  for 
certain  kinds  of  operations.  A  1966  CIA  study  explained  the  use  of 
legitimate  foundations  was  the  most  effective  way  of  concealing  the 
CIA's  hand  as  well  as  reassuring  members  of  funded  organizations 
that  the  organization  was  in  fact  supported  by  private  funds.  The 
Agency  study  contended  that  this  technique  was  "particularly  effec- 
tiv^e  for  democratically-run  membership  organizations,  which  need  to 
assure  their  own  unwitting  members  and  collaborators,  as  well  as  their 
hostile  critics,  that  they  have  genuine,  respectable,  private  sources  of 
income." 

2.  The  C/A^s  Fourtdation- funded  Covert  Activity,  Pre-1967 

The  philanthropic  fix)nts  used  prior  to  1967  funded  a  seemingly 
limitless  range  of  covert  action  programs  affecting  youth  groups,  labor 
unions,  univei-sities,  publishing  houses,  and  other  private  institutions 
in  the  United  States  and  abroad.  The  following  list  illustrates  the 
divei-sity  of  these  operations : 

(1)  The  CIA  assisted  in  the  establishment  in  1951  and  the  funding 
for  over  a  decade  of  a  research  institute  at  a  major  American  univer- 
sity. This  assistance  came  as  the  result  of  a  request  from  Under-secre- 
tary  of  State  James  Webb  to  General  Bedell  Smith,  then  Director  of 
the  CIA.  Mr.  Webb  proposed  that  the  center,  which  was  to  research 
worldwide  political,  economic,  and  social  changes,  be  supported  by  the 
CIA  in  the  interest  of  the  entire  intelligence  community. 

(2)  A  project  toas  undertaken  in  collaboration  ivith  a  i^ationally 
prominent  Arnerican  husin^ss  association.  The  object  of  the  project  was 
to  promote  a  favorable  image  of  America  in  a  foreign  country  unfavor- 
ably disposed  to  America  and  to  protnote  citizen-to-citizen  contacts 
between  Americans  and  influential  segments  of  that  country'' s  society? 

(3)  The  cooperation  of  an  American  labor  organization  in  selected 
overseas  labor  activities. 

(I)  Support  of  an  international  organization  of  veterans  and  an 
international  foundation  for  developing  countries. 

(5)  Support  of  an  organiziation  of  journalists  and  an  international 
women's  association. 

(6)  Partial  support  for  an  international  educational  exchange  pro- 
gram run  by  a  group  of  United  States  universities. 

(7)  Funding  of  a  legitimate  U.S.  association  of  farm  organiza- 
tions. Agency  funds  were  used  to  host  foreign  visitoi-s,  provide  scholar- 
ships to  an  international  cooperative  training  center  at  a  United  States 
university,  and  to  reimburse  the  organization  for  various  of  its  activi- 
ties abroad.  A  CIx\.  document  prepared  in  1967  notes  that  although 
the  organization  received  some  overt  government  funds  from  AID,  the 
CIA  should  continue  its  covert  funding  because  "programs  funded 
by  AID  cannot  address  themselves  to  the  same  political  goals  toward 
which  Agency  operations  are  targeted  because  AID  programs  are 
part  of  official  government-to-government  programs  and  are  designed 
for  economic — not  political — results." 


For  explanation  of  italics,  see  footnote,  p.  179. 


184 

The  Best  Known  Case:  Covert  Funding  of  the  National  Student 
Association 
CIA  funding  of  the  National  Student  Association  (NSA)  from  1952 
to  1967  is  a  particularly  good  example  of  how  the  United  States  Gov- 
ernment entered  the  field  of  covertly  supporting  "friends,"  of  the 
vulnerabilities  felt  by  the  CIA  in  undertaking  to  support  organizations 
and  individuals  that  cannot  be  controlled,  and  of  the  operational  temp- 
tation to  move  from  support  to  "control." 

The  reason  the  CIA  decided  to  help  NSA  is  clear.  In  the  yeai-s 
immediately  after  World  War  II  the  Soviet  Union  took  the  lead  in 
trying  to  organize  and  propagandize  the  world  student  movement. 
The  first  Soviet  Vice  President  of  the  International  Union  of  Stu- 
dents, for  example,  was  Alexander  N,  Shelepin,  wdio  later  became 
Chairman  of  the  Soviet  State  Security  Committee  (KGB).  The 
American  students  who  sought  to  compete  with  these  communist- 
managed  and  directed  student  group  were  hampered  by  a  lack  of 
funds,  while  the  communist  groups  had  enough  money  to  put  on 
world  youth  festivals,  conferences  and  forums,  and  regional  confer- 
ences. In  seeking  funds  at  home,  the  American  students  found  they 
were  considered  too  far  to  the  left  in  the  general  climate  of  Mc- 
Carthyism  and  anti-intellectualism  of  the  1950s.  Against  this  back- 
ground, NSA  officials,  after  being  refused  by  the  State  Department 
and  rebuffed  by  the  Congress,  were  finally  directed  by  the  State 
Department  in  i952  to  the  CIA.^ 

The  CIA  maintains  that  its  funding  efforts  were  based  on  shared  in- 
terests, not  on  manipulation.  CIA  funding  of  the  National  Student 
Association  appears  to  have  been  intended  primarily  to  permit  United 
States  students  to  represent  their  own  ideas,  in  their  own  way,  in  the 
international  forums  of  the  day.  Nevertheless,  the  Committee  has 
found  instances  in  which  the  CIA  moved  from  blank-check  support  to 
operational  use  of  individual  students."^ 

For  example,  over  250  U.S.  students  were  sponsored  by  the  CIA  to 
attend  youth  festivals  in  INIoscow,  Vienna,  and  Helsinki  and  were  used 
for  missions  such  as  reporting  on  Soviet  and  Third  World  personalities 
or  observing  Soviet  security  practices.  A  United  States  student,  for 
example,  was  recruited  in  1957  to  serve  as  a  CIA  "asset"  at  the  Sixth 
AVorld  Youth  Festival  in  Moscow.  According  to  CIA  documents,  he 
was  instructed  to  report  on  Soviet  counterintelligence  measures  and 
to  purchase  a  piece  of  Soviet-manufactured  equipment. 


*  Under  the  agreed  arrangement,  CIA  funds  would  support  only  the  interna- 
tional division  of  the  National  Student  Association ;  only  the  NSA  President  and 
the  International  Affairs  Vice  President  would  be  Avitting  of  the  CIA  connection. 
Each  year,  after  the  election  of  new  student  leaders,  the  CIA  held  a  secret 
briefing  for  tlie  new  officers,  and  elicited  from  them  a  secrecy  agreement. 
During  the  1960s  however,  witting  National  Student  A.ssociation  leaders  be- 
came increasingly  restive  about  the  CIA  sponsorship,  until  finally  in  1967  one 
of  them  revealed  the  relation.ship  to  Ramparts  magazine. 

"  "Operational  use"  of  individuals  as  used  in  this  report  means  recruitment,  use, 
or  training,  on  either  a  witting  or  unwitting  basis,  for  intelligence  purposes. 
That  is.  the  individual  is  directed  or  "tasked"  to  do  something  for  the  CIA — as 
opposed  to  volunteering  information.  Such  purposes  include  covert  action,  clan- 
destine intelligence  collection  (espionage)  and  various  kinds  of  support 
functions. 


185 

Altliou^h  the  CIA's  involvement  with  the  National  Student  As- 
sociation was  limited  to  the  oro;;anization's  international  activities, 
CIA  influence  was  felt  to  some  extent  in  its  domestic  programs  as  well. 
T)ie  mo?t  direct  way  in  which  such  influence  may  have  been  felt  was  in 
the  selection  process  for  NSA  officers.  The  Summer  International 
Seminars  conducted  for  NSA  leaders  and  potential  leaders  in  the 
United  States  during-  the  1950's  and  1960's  were  a  vehicle  for  the 
Agency  to  identify  new  leaders  and  to  promote  their  candidacy  for 
elective  positions  in  the  National  Student  Association. 

The  Central  Intelligence  Agency's  experience  with  the  NSA  under- 
lines the  basic  problem  of  an  action-oriented  clandestine  organization 
entering  into  a  coved  f  imding  relationship  witli  private  organizations : 
support  of  friends  turns  into  the  control  of  their  actions  and  ulti- 
mately to  creation  of  new  "friends." 

3.  Cover  is  Blown:  The  Patman  and  Ramparts  '"''Flaps'''' 

In  a  public  hearing  in  1964,  Congressman  Wright  Patman,  Chair- 
man of  the  Subcommittee  on  Foundations  of  the  House  Committee 
on  Problems  of  Small  Businesses,  revealed  the  names  of  eight  of  the 
CIA's  funding  instruments — ^the  so-called  "Patman  Eight."  These  dis- 
closures sharply  jarred  the  Agency's  confidence  in  the  seciirity  of  these 
pliilanthropic  funding  mechanisms. 

The  Patman  disclosures  led  the  CIA  to  take  a  hard  look  at  this 
technique  of  funding,  but  not  to  reconsider  the  propriety  of  bringing 
the  independence  of  America's  foundations  into  question  by  using 
them  as  conduits  for  the  funding  of  coveit  action  projects.  According 
to  the  Chief  of  the  Covert  Action  Staff's  Program  and  Evaluation 
Group : 

The  real  lesson  of  the  Patman  Flap  is  not  that  we  need  to  get 
out  of  the  business  of  using  fomidation  cover  for  funding,  but 
that  we  need  to  get  at  it  more  professionally  and  extensively. 

Despite  the  best  efforts  of  the  Agency  throughout  1966  to  shore  up 
its  vuhierable  funding  mechanisms,  it  became  increasingly  clear  that 
Ramparts  magazine,  the  Nein  York  Times,  and  the  Washington  Post 
were  moving  ever  closer  to  unraveling  not  only  the  CIA's  system  of 
clandestine  funding  but  to  exposing  the  source  of  the  support  for  the 
National  Student  Association.  In  an  effort  to  determine  whether  there 
was  foreign  influence  on  funds  behind  the  Ramparts  expose,  the  CIA, 
in  coordination  with  the  FBI,  undertook  through  its  own  counterintel- 
ligence staff  to  prepare  extensive  reports  on  the  Ramparts  officers  and 
staff'  members.*^ 

At  a  press  briefing  on  February  14,  1967,  the  State  Department 
publicly  confirmed  a  statement  by  leaders  of  NSA  that  their  organiza- 
tion had  i-eceived  covert  support  from  the  CIA  since  the  early  1950s. 
The  NSA  statement  and  disclosures  in  Ramparts  magazine  brought  on 
a  storm  of  public  and  congressional  criticism.  In  response.  President 


"The  Agency  appointed  a  special  assistant  to  the  Deputy  Director  for  Plans, 
who  was  charged  with  "pulling  together  information  on  Ramparts,  includ- 
ing any  evidence  of  .subversion  [and]  devising  proposals  for  counteraction."  In 
pursuing  the  "Communist  ties"  of  Ramparts  magazine,  the  "case"  of  managing 
editor,  Robert  Scheer,  was  one  of  the  first  to  be  developed  and  a  report  was  sent 
on  Scheer  to  Walt  W.  Rostow,  Special  Assistant  to  President  Johnson. 


69-983  O  -  76  -  13 


186 

Johnson  org-anized  a  committee  conn)osed  of  lindersecretary  of  State 
Nicholas  Katzenbacli,  Secretary  of  HEW  John  Gardner,  and  CIA 
Director  Richai'd  Hehns  to  review  government  activities  that  may 
"endanger  the  integrity  and  independence  of  the  edncational  comnui- 
nity."  The  connnittee's  life  was  short — i3  days — but  its  recommenda- 
tions, accepted  by  President  Johnson  on  March  '2d,  1967,  Avere  to  have 
a  profound  effect  on  the  CIA's  clandestine  operations,  both  in  the 
ITnited  States  and  abroad. 

4.  The  Katzetibach  Committee 

President  Johnson's  concern  for  the  integrity  and  independence  of 
American  institutions  could  have  resulted  in  the  Katzenbacli  Commit- 
tee being  charged  with  general  review  of  the  domestic  impact  of 
clandestine  activities  and  their  effect  on  American  institutions ;  includ- 
ing consideration  of  iwhether  all  coveit  relationships  should  be 
prohibited,  and,  if  not,  what  guidelines  should  be  imposed  on  the  use 
of  institutions  and  individuals. 

Instead,  the  Johnson  Administration  carefully  and  consciously 
limited  the  mandate  of  the  Katzenbacli  Committee's  investigation  to 
the  relationship  between  the  CIA  and  "U.S.  educational  and  private 
voluntary  organizations  which  operate  abroad."  In  a  February  24 
memorandum  to  Grardner  and  Helms,  Katzenbacli  cited  the  narrow- 
ness of  the  mandate  in  listing  problems  faced  by  the  Committee : 

1.  The  narrow  scope  of  this  mandate,  as  compared  with  the 
demands,  by  Senator  IMansfield,  et  al,  that  this  flap  be  used 
as  a  springboard  for  a  review  of  all  clandestine  financing  by 
CIA. 

2.  More  specifically,  the  exclusion  in  this  mandate  of  rela- 
tionships between  CIA  and  American  businesses  abroad. 

3.  Focusing  the  mandate  on  CIA,  rather  than  on  all  private 
organization  relationships  with  government  agencies. 

In  testimony  before  this  Committee,  JNIr.  Katzenbacli  said  that  his 
committee  w^as  designed  by  President  Johnson  not  only  to  deal  with 
the  relationship  of  the  CIA  to  educational  and  voluntary  organizations, 
but  to  head  off  a  full-scale  congressional  investigation.'^ 

All  other  covert  relationships  were  to  be  excluded  from  the  investiga- 
tion. In  a  memo  to  his  colleagues,  the  Deputy  Chief  of  the  Covert 
Action  Staff  reported : 

It  is  stated  that  the  country  operations  funded  by  black  bag 
[sterilized  or  laundered  funds]  were  not  to  be  included  in  the 
CIA's  response  to  the  Katzenbacli  Commission  and  empha- 
sized that  the  focus  of  this  paper  was  to  be  on  organizations. 

In  addition  the  Katzenbacli  Committee  did  not  undertake  investi- 
gation of  CIA  domestic  commercial  operations,  specifically  those  de- 
signed to  provide  cover  for  clandestine  intelligence  operations  which 

''  Nicholas  Katzenbacli  testimony,  10/11/75,  p.  5.  Katzenbacli  also  said  of  the 
President's  decision  on  membership  : 

".  .  .  he  [the  President]  wanted  John  Gardner  on  it  becanse  he  thonsht  that 
would  help  politically  in  getting  acceptance  of  whatever  the  recommendations 
turned  out  to  be  because  he  thought  Helms  would  defend  everything  and  wanted 
to  continue  everything.  Gardner  would  want  to  stop  everything.  It  was  my  job  to 
come  out  with  something  in  the  middle."  {Ibid). 


187 

the  U.S.  directed  at  such  taro-ets  as  foreig'ii  students,  foi'eign  business- 
men, foreign  diplomatic  and  consular  officials  travelling  or  residing 
in  the  United  States. 

Despite  the  narrowness  of  its  mandate,  the  actual  investigation  of 
the  Katzenbach  Committee  was  vigorous  and  thorough.  After  delib- 
eration, the  Committee  issued  the  basic  recommendation  that : 

It  should  be  the  policy  of  the  United  States  Government  that 
no  federal  agency  shall  provide  any  covert  financial  assist- 
ance or  support,  direct  or  indirect,  to  any  of  the  nation's 
educational  or  private  voluntary  organizations. 

In  May  1967  the  Deputy  Director  for  Plans  Desmond  FitzGerald 
interpreted  the  post-Katzenbach  ground  rules  in  a  circular  to  the  field. 
He  stated : 

Several  operational  guidelines  emerge: 

a.  Covert  relations  with  commercial  U.S.  organizations  are 
not,  repeat,  not  barred. 

b.  Covert  funding  overseas  of  foreign-based  international 
organizations  is  permitted. 

He  indicated  that  greatei-  care  would  be  needed  in  the  conduct  of 
clandestine  operations,  in  order  to  prevent  disclosures : 

a.  The  care  required  under  the  Katzenbach  Report,  with 
respect  to  the  recruitment  and  use  of  U.S.  students,  and  U.S. 
university  professors,  applies  equally  to  the  recruitment  and 
use  of  foreign  students.  .  .  . 

In  simple  terms,  we  are  now  in  a  different  ballgame.  Some 
of  the  basic  ground  rules  have  changed.  When  in  doubt,  ask 
HQs. 

5.  A  Different  Ball  game:  CIA  Response  to  Katzenhach 

The  policy  guidelines  established  in  the  Katzenbach  Report  and 
supplemental  guidelines  with  w^hich  the  CIA  interpreted  the  Report 
brought  major  adjustments  in  covert  action  programs  and  methods. 
Some  77  projects  were  examined  at  high  levels  within  the  CIA,  and 
lists  were  drawn  up  of  projects  to  be  terminated,  projects  to  be  trans- 
ferred to  other  sources  of  funding,  projects  to  continue,  and  projects 
whose  future  required  higher  level  decisions.  The  303  Committee  met 
frequently  throughout  1967  and  1968  to  deal  with  difficult  questions, 
such  as  how  to  provide  for  continued  funding  of  Radio  Fi'ee  Europe 
and  Radio  Liberty. 

At  the  same  time  the  Agency  was  withdrawing  fi'om  support  of 
a  large  number  of  domestically-based  organizations,  it  moved  rapidly 
to  shelter  certain  high-priority  oj)erations  from  the  Katzenbach  pro- 
hibitions and  to  devise  more  secure  funding  mechanisms.  This  process 
was  facilitated  by  wdiat  was  termed  "surge  funding."  The  Katzen- 
bach guidelines  called  for  termination  of  CIA  funding  of  domesti- 
cally based  U.S.  organizations  by  December  31,  1967.  With  303  Com- 
mittee approval  for  the  largest  grants,  the  Agency  "surge  funded"  a 
number  of  organizations,  giving  them  advances  before  the  December 
deadline  which  carried  them  in  some  cases  for  up  to  two  years  of  op- 
erations. Radio  Free  P^urope  and  Radio  Liberty  were  so  funded. 

In  adjusting  to  the  "new  ballgame,"  the  appearance  of  contraven- 
ing the  Katzenbach  guidelines,  rather  than  specific  regulations,  was 


188 

seen  as  a  reason  not  to  continue  relationships  with  certain  institutions. 
At  the  same  time,  at  least  one  case  suggests  that  even  a  clean  termina- 
tion of  fundino-  with  a  private  oro-anization  did  not  necessarily  end 
the  CIA's  support  of  the  policies  and  programs  of  the  oroanization,  A 
CIA  report  on  termination  plans  for  a  large  project  in  the  Far  East 
indicated  that,  with  surge  funding,  the  organization  could  continue 
into  fiscal  year  1969,  and  that  thereafter  "[the  organization's]  Board 
of  Trustees  will  assume  full  responsibility  for  the  organization  and 
has  pledged  to  continue  its  policies  and  range  of  activities." 

Tile  following  are  examples  of  the  score  of  projects  which  the  CIA 
reviewed  in  1967  and  decided  to  contimie  to  fund  : 

(1)  A  publications  and  press  institute  that  maintained  a  worldwide 
network  of  stringers  and  correspondents.  A  CIA  report  on  the  project 
asserted  that  it  "exerts  virtually  no  domestic  influence  in  any  quainter, 
although  its  publications  are  read  bv  U.S.  students." 

(2)  Several  international  trade  union  organizations. 
(o)   A  foreigni-based  news  feature  service. 

(4)   A  foreign-based  research  and  publishing  institute. 

In  reviewing  the  CIA's  adjustments  to  the  Katzenbach  Committee's 
recommendations,  the  Committee  found  no  violations  of  the  policy 
the  i-eport  sets  foi'th.  However,  it  is  important  to  recognize  how 
narrow  the  focus  of  the  Katzenbach  Committee's  concern  was.  The 
problem  was  a):)proached  by  the  committee  and  by  the  CIA  essentially 
as  one  of  security:  how  to  limit  the  dauiage  caused  by  the  revelations 
of  CIA  relationships  with  private  I^.S.  institutions.  Many  of  the 
restrictions  developed  by  the  CIA  in  response  to  the  events  of  1967 
appear  to  be  security  measures  aimed  at  preventing  furthei-  public 
disclosures  which  could  jeopardize  sensitive  CIA  operations.  They  did 
not  represent  significant  rethinking  of  where  boundaries  ought  to  be 
drawn  in  a  fi-ee  society.  Moreover,  although  President  Johnson  adopted 
the  Katzenbach  report  as  policy,  it  was  not  issued  as  an  executive  order 
or  enacted  as  a  statute.  Thus,  it  has  no  firm  legal  status, 

0.  Post  1967  Relations  with  the  TLS.  Acadernic  Oommunity 

In  analyzing  the  adequacy  of  the  Katzenbach  regulations 
and  of  the  CIA's  compliance  with  them,  the  Select  Committee  concen- 
trated much  of  its  attention  on  contemporai-y  relationships  between  the 
CIA  and  the  IT.S.  academic  conununity.  The  Committee  interprets 
"academic  community"  to  include  more  than  the  Katzenbach  Com- 
mittee undoubtedly  had  in  mind  when  it  recommended  prohibition  of 
"covert  financial  assistance  or  support  .  .  .  to  any  of  the  nation's  edu- 
cational .  .  .  organizations."  "Academic  conununity''  has  been  inter- 
preted by  this  Committee  to  include  universities,  university-related 
research  centers,  and  the  full  range  of  individual  scholars  and  school 
administrators,  ranging  from  department  heads  to  career  counselors 
and  to  Ph.D.  candidates  engaged  in  teaching.  The  Committee  has 
approached  this  inquiry  with  three  principal  questions: 

(1)  What  is  the  extent  and  nature  of  CIA  relationships  with  U.S. 
academic  institutions  and  with  individual  American  academics^ 

('2)  What  are  the  guidelines  and  ground  rules  governing  CIA  post- 
Katzenbach  relations  with  the  academic  community  ? 

(;>)  What  issues  are  at  stake;  what  threats,  if  any,  do  current  rela- 
tions pose  for  the  independence  of  this  influential  sector  of  society? 


189 

The  CIA  relationships  with  the  academic  community  are  extensive 
and  serve  many  purposes,  inchiding  providino;  leads  and  makiiig-  intro- 
ductions for  intellioence  purposes,  collaboration  in  research  and  anal- 
ysis, intellioence  collection  abroad,  and  preparation  of  books  and  other 
propaganda  materials. 

The  Select  Committee's  concentration  has  been  on  the  area  of  clan- 
destine relationships  untouched  by  the  Katzenbach  Committee — 
individuals. 

7.  Covert  Relations  with  Individuals  in  the  Academic  Community 
As  already  noted,  from  the  first  days  of  the  Katzenbach  Commit- 
tee, the  CIA  proceeded  on  the  operating  assumption  that  the  inquiry 
was  directed  squarely  at  institutional  relationships — not  individuals  in 
or  affiliated  with  those  private  institutions.  After  the  Katzenbach 
report,  the  Agency  issued  a  basic  instruction  entitled  "Restrictions  on 
Operational  Use  of  Certain  Categories  of  Individuals."  This  instruc- 
tion remains  in  force  today.  The  instruction  states  that  the  "basic  rule"' 
for  the  use  of  human  agents  by  the  Operations  Directorate  is  that 
"any  consenting  adult''  may  be  used. 

While  all  members  of  the  American  academic  community,  including 
students,  certainly  qualify  as  "consenting  adults,''  the  CIA  since  1967 
has  been  particularly  sensitive  to  the  risks  associated  with  their  use. 
In  order  to  control  and  confine  contacts  with  American  academics,  the 
handling  of  relationships  with  individuals  associated  with  universities 
is  largely  confined  to  tM^o  CIA  divisions  of  the  Directorate  of  Opera- 
tions— ^the  Domestic  Collection  Division  and  the  Foreign  Resources 
Division.  The  Domestic  Collection  Division  is  the  point  of  contact 
with  lai'ge  numbers  of  American  academics  who  travel  abroad  or  who 
are  otherwise  consulted  on  the  subject  of  their  expertise.  The 
Foreign  Resources  Division,  on  the  other  hand,  is  the  purely  opera- 
tional arm  of  the  CIA  in  dealing  with  American  academics.  Alto- 
gether, DCD  and  FRD  are  currently  in  contact — ranging  from  the 
occasional  debriefing  to  a  continuing  operational  relationship — with 
many  thousands  of  United  States  academics  at  hundreds  of  U.S. 
academic  institutions. 

It  is  imperative  to  underline  that  the  majority  of  these  relationships 
are  purely  for  the  purpose  of  asking  an  academic  about  his  travels 
abroad  or  open  informal  consulting  on  subjects  of  the  academic's  ex- 
pertise. The  Committee  sees  no  danger  to  the  integrity  of  American 
private  institutions  in  continuing  such  contacts;  indeed,  there  are 
benefits  to  both  the  government  and  the  universities  in  such  contacts. 

The  CIA's  Office  of  Personnel  also  maintains  relationships  with 
university  administrators,  sometimes  in  the  placement  office.  These 
relationships,  which  are  usually  contractual,  enable  the  CIA  to  ap- 
proach suitable  Ignited  States  students  for  CIA  employment. 

The  "operational  use"  of  academics  is  another  matter.  It  raises  trou- 
bling questions  as  to  preservation  of  the  integrity  of  American  aca- 
demic institutions. 

8.  Covert  Use  of  the  U.S.  AcadeTnic  Co7nm/u/nity 

The  Central  Intelligence  Agency  is  noiv  using  several  hundred 
American  academics '^'^.,  who  in  addition  to  ^providing  leads  and.,  on 

"  "Academics"  includes  administrators,  faculty  members  and  graduate  students 
engaged  in  teaching. 


190 

occasion^  rruiking  introductions  for  intelligence  purposes^  occasionally 
write  hooks  mid  other  material  to  he  used  for  propaganda  purposes 
abroad.  Beyond  these.,  an  additional  few  score  are  used  in  an  unwitting 
manner  for  minor  activities. 

These  academics  are  located  in  over  100  American  colleges.,  univer- 
sities., and  related  institutes.  At  the  majority  of  institutions^  no  one 
other  than  the  individual  concerned  is  aware  of  the  CIA  link.  At 
tJie  others,  at  least  one  university  official  is  aioare  of  the  operational  use 
made  of  academics  on  his  campus.  In  addition.,  there  are  several  Amer- 
ican academics  ahroad  loho  serve  operational  purposes.;  primarily  the 
collection  of  intelligence.^'^ 

The  CIA  considers  these  operational  relationships  with  the  United 
States  academic  community  as  perhaps  its  most  sensitive  domestic  area 
and  has  strict  controls  governing  these  operations.  According  to  the 
Agency's  internal  directives,  the  following  distinctions  govern  the 
operational  use  of  individuals :  the  CIA's  directives  prohibit  the  opera- 
tional use  of  individuals  who  are  receiving  support  under  the  Mutual 
Education  and  Cultural  Exchange  Act  of  1961,  commonly  known  as 
the  Fulbright-Hays  Act.  Falling  under  this  ])articular  prohibition  are 
teachers,  research  scholars,  lecturers,  and  students  who  have  been 
selected  to  receive  scholarships  or  grants  by  the  Board  of  Foreign 
Scholarships.  This  prohibition  specifically  does  not  apply  to  the  several 
other  categories  of  grantees  supported  by  other  pr-ovisions  of  the  Ful- 
bright-Hays Act,  such  as  artists,  athletes,  leaders,  specialists,  or  par- 
ticipants in  international  trade  fairs  or  expositions,  who  do  not  come 
under  the  aegis  of  the  President's  Board  of  Foreign  Scholarships.  As 
far  as  the  three  major  foundations — Ford,  Rockefeller  and  Carnegie — - 
are  concerned,  the  prohibition  extends  to  "persons  actively  participat- 
ing in  programs  which  are  wholly  sponsored  and  controlled  by  any  of 
these  foundations.  Additionally,  there  Avill  be  no  operational  use  made 
of  the  officials  or  employees  of  the.se  organizations."  (These  large  foun- 
dations were  cited  by  a  CIA  official  in  1960  before  the  30.'^  Committee 
as  "a  trouble  area  in  New  York  City — reluctant  to  cooperate  on  joint 
ventures.") 

0.  Covert  Relationships  toith  Acadameic  and  Voluntary  Organizations : 
Conclusions 
With  respect  to  CIA  covert  relationships  with  private  institutions 
and  voluntary  organizations,  the  Committee  concludes: 

(1)  The  CIA  has  adhered  to  the  1967  Katzenbach  guidelines  govern- 
ing relation^jhips  with  domestic  private  and  voluntary  institutions.  The 
guidelines  are  so  narrowly  focused,  however,  that  the  covert  use  of 
American  individuals  from  these  institutions  has  continued. 

(2)  American  academics  are  now  beiuir  used  for  such  operational 
l)ur))oses  as  making  introductions  for  intelligence  purposes  ^^^  and 
working  for  the  Agency  abroad.  Although  the  numbers  are  not  as  great 
today  as  in  1966,  there  are  no  prohibitions  to  prevent  an  increase  in  the 
operational  use  of  academics.  The  size  of  these  operations  is  determined 
by  the  CIA. 

(8)  With  the  exception  of  those  teachei's.  scholars  and  students 
who  receive  scholarships  or  grants  from  the  Board  of  Foreign  Scholar- 


"  For  explanation  of  italics,  see  footnote,  p.  170. 


191 

ships,  the  CIA  is  not  prohibited  from  the  operational  use  of  all  other 
categories  of  grantee  support  under  the  Fulbright-Hays  Act  (artists, 
athletes,  leadere,  specialists,  etc.).  Nor  is  there  any  prohibition  on  the 
operational  use  of  individuals  participating  in  any  other  exchange 
program  funded  by  the  Ignited  States  Government. 

In  addressing  the  issues  of  the  CIA's  relationship  to  the  American 
academic  community  the  Committee  is  keenly  aware  that  if  the  CIA 
is  to  serve  the  intelligence  needs  of  the  nation,  it  nnist  have  unfettered 
access  to  the  best  advice  and  judgment  our  universities  can  produce. 
But  this  advice  and  expertise  can  and  should  be  openly  sought — and 
openly  given.  Suspicion  that  such  openness  of  intellectual  encounter 
and  exchange  is  complemented  by  covert  operational  exploitation  of 
academics  and  students  can  only  prejudice,  if  not  destroy,  the  pos- 
sibility of  a  full  and  fruitful  exchange  between  the  nation's  best  minds 
and  the  nation's  most  critical  intelligence  needs.  To  put  these  intel- 
lects in  the  service  of  the  nation,  tnist  and  confidence  must  be  main- 
tained between  our  intelligence  agencies  and  the  academic  community. 

The  Committee  is  disturbed  both  by  the  present  practice  of  opera- 
tionally using  American  academics  and  by  the  awareness  that  the 
restraints  on  expanding  this  practice  are  primarily  those  of  sensitivity 
to  the  risks  of  disclosure  and  not  an  appreciation  of  dangers  to  the 
integrity  of  individuals  a;id  institutions.  Nevertheless,  the  Commit- 
tee does  not  recommend  a  legislative  prohibition  on  the  operational 
exploitation  of  individuals  in  private  institutions  by  the  intelligence 
agencies.  The  Conmiittee  views  such  legislation  as  both  unenforceable 
and  in  itself  an  intrusion  on  the  pri^'acy  and  integrity  of  the  American 
academic  community.  The  Committee  believes  that  it  is  the  respon- 
sibility of  private  institutions  and  particularly  the  American  academic 
community  to  set  the  professional  and  ethical  standards  of  its  mem- 
bers. This  report  on  the  nature  and  extent  of  covert  individual  rela- 
tions with  the  CIA  is  intended  to  alert  these  institutions  that  there  is 
a  problem. 

xVt  the  same  time,  the  Committee  recommends  that  the  CIA  amend 
its  internal  directives  to  require  that  individual  academics  used  for 
operational  purposes  by  the  CIA,  together  with  the  President  or  equiv- 
alent official  of  the  relevant  academic  institutions,  be  informed  of  the 
clandestine  CIA  relationship. 

The  Committee  also  feels  strongly  that  there  should  be  no  opera- 
tional use  made  of  professors,  lecturers,  students,  artists,  and  the  like 
who  are  funded  under  Ignited  States  Government-sponsored  programs. 
The  prohibition  on  the  operational  use  of  Fulbright  grantees  must  be 
extended  to  other  government-sponsored  programs;  and  in  this  case 
the  prohibition  should  be  confirmed  by  law.  given  the  direct  responsi- 
bility of  the  Congress  for  these  programs.  It  is  unacceptable  that 
Americans  would  go  overseas  under  a  cultural  or  academic  exchange 
program  funded  openly  by  the  United  States  Congress  and  at  the 
same  time  serve  an  operational  purpose  directed  by  the  Central  Intelli- 
gence Agency. 

B.  Covert  Relationships  With  the  United  States  Media 

In  pursuing  its  foreign  intelligence  mission  the  Central  Intelligence 
Agency  has  used  the  U.S.  media  for  both  the  collection  of  intelligence 


192 

and  for  cover.  Until  February  1976,  when  it  announced  a  new  policy 
toward  U.S.  media  personnel,  the  CIA  maintained  covert  relation- 
ships with  about  50  American  journalists  or  employees  of  U.S.  media 
organizations.  They  are  part  of  a  network  of  several  hundred  foreign 
individuals  around  the  world  who  provide  intelligence  for  the  CIA  and 
at  times  atteinpt  to  influence  foreign  opinion  through  the  use  of 
covert  propaganda.  These  individuals  provide  the  CIA  ivith  direct 
access  to  a  large  number  of  foreign  neiospapers  and  periodicals.,  scores 
of  press  services  and  n£ws  agencies,  radio  and  television  stations,  com- 
mercial book  publishers,  and  other  foreign  media  outlets}'^ 

The  CIA  has  been  particularly  sensitive  to  the  charge  that  CIA 
covert  relationships  with  the  American  media  jeopardize  the  credibil- 
ity of  the  American  press  and  risk  the  possibility  of  propagandizing 
the  U.S.  public.  Former  Director  William  Colby  expressed  this  con- 
cern in  recent  testimony  before  the  House  Select  Committee  on 
Intelligence : 

We  have  taken  particular  caution  to  ensure  that  our  opera- 
tions are  focused  abroad  and  not  at  the  United  States  in  order 
to  influence  the  opinion  of  the  American  people  about  things 
from  a  CIA  point  of  view. 

As  early  as  1967,  the  CIA,  in  the  wake  of  the  National  Student 
Association  disclosure,  moved  to  flatly  prohibit  the  publication  of 
books,  magazines,  or  newspapers  in  the  United  States.  iNlore  recently, 
George  Bush,  the  new  Director,  undertook  as  one  of  his  first  actions  to 
recognize  the  "special  status  alt'orded  the  American  media  under  our 
Constitution''  and  therefore  pledged  that  "CIA  will  not  enter  into 
any  paid  or  contractual  relationship  with  any  full-time  or  part-time 
news  correspondent  accredited  by  any  United  States  news  service, 
newspaper,  periodical,  radio  or  television  network  or  station."  ^^ 

In  approaching  the  subject  of  the  CIA's  relationship  with  the  United 
States  media,  the  Select  Committee  has  been  guided  by  several  broad 
concerns.  It  has  inquired  into  the  covert  publication  of  propaganda 
in  order  to  assess  its  domestic  impact;  it  has  investigated  the  nature 
and  purpose  of  the  covert  relationships  that  the  CIA  maintains  with 
bona  fide  U.S.  journalists;  it  has  examined  the  use  of  journalistic 
"cover"  by  CIA  agents;  it  has  pursued  the  difficult  issue  of  domestic 
"fallout"  from  CIA's  foreign  press  placements  and  other  propaganda 
activities.  Throughout,  it  lias  compared  current  practice  to  the  regula- 
tions restricting  activities  in  this  area,  in  order  both  to  establish 
whether  the  CIA  has  complied  with  existing  regulations,  and,  more 
important,  in  order  to  evaluate  the  adequacy  of  the  regulations 
themselves. 

1.  Books  and  Publishing  Hoioses 

Covert  propaganda  is  the  hidden  exercise  of  the  power  of  pei-sua- 
sion.  In  the  world  of  covert  propaganda,  book  publishing  activities 
have  a  special  place.  In  1961  the  Chief  of  the  CIA's  Covert  Action 


'  For  explanation  of  footnotes,  see  p.  179. 
George  Bush  statement,  2/11/76. 


193 

Staff,  who  had  responsibility  for  the  covert  propaganda  program, 

wrote : 

Books  differ  from  all  other  propaganda  media,  primarily 
because  one  single  book  can  sigiiifieantly  change  the  reader's 
attitude  and  action  to  an  extent  unmatched  by  the  impact  of 
any  other  single  mediujii  .  .  .  this  is,  of  couree,  not  true  of  all 
books  at  all  times  and  with  all  readers — but  it  is  true  signifi- 
cantly often  enough  to  make  books  the  most  important 
weapon  of  strategic  (long-range)  propaganda. 

According  to  The  Chief  of  the  Covert  Action  Staff,  the  CIA's  clan- 
destine handling  of  book  publishing  and  distribution  could : 

(a)  Get  books  published  or  distributed  abroad  \yithout 
revealing  any  U.S.  influence,  by  covertly  subsidizing  foreign 
publications  or  booksellers. 

(b)  Get  books  published  which  should  not  be  "contam- 
inated'' by  any  overt  tie-in  with  the  U.S.  government,  espe- 
cially if  the  position  of  the  author  is  "delicate.'" 

(c)  Get  books  published  for  operational  reasons,  regardless 
of  connnercial  viability. 

(d)  Initiate  and  subsidize  indigenous  national  or  inter- 
national organizations  for  book  publishing  or  distributing- 
purposes. 

(e)  Stimulate  the  writing  of  politically  significant  books 
by  unknown  foreign  authors — either  by  directly  subsidizing 
the  author,  if  covert  contact  is  feasible,  or  indirectly,  through 
literary  agents  or  publishers. 

Well  over  a  thousand  books  were  produced,  subsidized  or  spon- 
sored by  the  CIA  before  the  end  of  1967.  Approximately  25  percent  of 
them  were  written  in  English.  ^lany  of  them  were  published  by  cul- 
tural organizations  which  the  CIA  backed,  and  more  often  than  not  the 
author  was  unaware  of  CIA  subsidization.  Some  books,  llo^yever,  in- 
volved direct  collaboration  between  the  CIA  and  the  writer.  The 
Chief  of  the  Agency's  propaganda  unit  wrote  in  1961 : 

The  advantage  of  our  direct  contact  with  the  author  is 
that  we  can  acquaint  him  in  great  detail  with  our  intentions; 
that  we  can  provide  him  with  whatever  material  we  want  him 
to  include  and  that  we  can  check  the  manuscript  at  every 
stage.  Our  control  over  the  writer  will  have  to  be  enforced 
usually  by  paying  him  for  the  time  he  works  on  the  manu- 
script, or  at  least  advancing  him  sums  which  he  might  have 
to  repay  .  .  .  [the  Agency]  must  make  sure  the  actual  manu- 
script will  correspond  with  our  operational  and  propagandis- 
tic  intention.  .  .  . 

The  Committee  has  i-eviewed  a  few  examples  of  what  the  Chief  of 
the  Covei-t.  Action  Staff'  termed  "books  published  for  operational  rea- 
sons regardless  of  commercial  viability."  Examples  inchided : 

(1)  A  book  about  the  conflict  in  Indochina  was  pi'oduced  in  1954 
at  the  initiation  of  the  CIA's  Far  East  Division.  A  major  I^.S.  publish- 
ing house  under  contract  to  the  CIA  published  the  book  in  French  and 
English.  Copies  of  both  editions  were  distributed  to  foreign  embassies 


194  ' 

in  the  United  States,  and  to  selected  newspapers  and  magazine  editors 
both  in  the  United  States  and  abroad. 

(2)  A  book  about  a  student  from  a  developing  country  who  had 
studied  in  a  communist  country  "was  developed  by  [two  area  divisions 
of  the  CIA]  and  produced  by  the  Domestic  Operations  Division  .  .  . 
and  has  had  a  high  impact  in  the  U.S.  as  well  as  the  [foreign  area] 
market."  The  book,  which  was  published  by  the  European  outlet  of  a 
U.S.  publishing  house,  was  published  in  condensed  form  in  two  major 
U.S.  magazines.  Eric  Severeid,  the  CBS  political  commentator,  in 
reviewing  this  book,  spoke  a  larger  truth  than  he  knew  when  he  sug- 
gested that  "our  propaganda  services  could  do  worse  than  to  flood 
[foreign]  university  towns  with  this  volume." 

(3)  Another  CIA  book,  the  Penkovskiy  Papers^  was  published  in 
the  United  States  in  1965  "for  operational  reasons",  but  actually 
became  commercially  viable.  The  book  was  prepared  and  written 
by  witting  Agency  assets  who  drew  on  actual  case  materials.  Publi- 
cation rights  to  the  manuscript  were  sold  to  a  publisher  through  a 
trust  fund  which  was  established  for  the  purpose.  The  publisher  was 
unaware  of  any  U.S.  Government  interest. 

The  publishing  program  in  the  period  before  the  National  Student 
Association  disclosures  was  large  in  volume  and  varied  in  taste.  In 
1967  alone  the  CIA  published  or  subsidized  well  over  200  books,  rang- 
ing from  books  on  wildlife  and  safaris  to  translations  of  Machiavelli's 
The  Prince  into  Swahili  and  works  of  T.  S.  Eliot  into  Russian,  to  a 
parody  of  the  famous  little  red  book  of  quotations  from  Mao  entitled 
Quotations  from  Chairman  Liu. 

The  publicity  which  in  1967  surrounded  several  CIA  sponsored  or- 
ganizations and  threatened  to  expose  others  caused  the  CIA  to  act 
quickly  to  limit  its  use  of  U.S.  publishers.  In  direct  response  to  the 
Katzenbach  report,  Deputy  Director  for  Plans  Desmond  FitzGerald 
ordered,  "We  will,  mider  no  circumstances,  publish  books,  magazines 
or  newspapers  in  the  United  States." 

With  this  order,  the  CIA  suspended  direct  publication  and  subsi- 
dization within  the  United  States  not  only  of  books,  but  also  of  jour- 
nals and  newsletters,  including:  a  magazine  published  by  a  United 
States-based  proprietary  for  cultural  and  artistic  exchange;  a  news- 
letter mailed  to  foreign  students  studying  in  North  American  univer- 
sities under  the  sponsorship  of  a  CIA  proprietary  foundation ;  and  a 
publication  on  Latin  American  affairs  published  in  the  United  States. 

Thus  since  1967  the  CIA's  publishing  activities  have  almost  entirely 
been  confined  to  books  and  other  materials  published  abroad.  During 
the  past  few  years,  some  250  books  have  been  published  abroad,  most 
of  them  in  foreign  languages. 

As  previously  noted,  the  CIA  has  denied  to  the  Committee  a  number 
of  the  titles  and  names  of  authors  of  the  propaganda  books  published 
since  1967.  Brief  descriptions  provided  by  ih^&  Agency  indicate  the 
breadth  of  subject  matter,  which  includes  the  following  topics,  aniong 
many  others : 

(1)  Commercial  ventures  and  commercial  law  in  South 
Vietnam ; 

(2)  Indochina  representation  at  the  U.N. ; 

(3)  A  memoir  of  the  Korean  War ; 


195 

(4)  The  prospects  for  European  union; 

(5)  Chile  under  Allende. 

2.  Covert  Use  of  U.S.  Journalists  and  Media  Institutions 

On  February  11, 1976,  the  CIA  announced  new  guidelines  governing 
its  relationship  with  U.S.  media  organizations: 

Effective  immediately,  CIA  will  not  enter  into  any  paid  or 
contractual  relationship  with  any  full-time  or  part-time  news 
correspondent  accredited  by  any  U.S.  newsservice,  newspaper, 
periodical,  radio  or  television  network  or  station.^^ 

Of  the  approximately  50  U.S.  journalises  or  personnel  of  U.S.  media 
organizations  who  were  employed  by  the  CIA  or  maintained  some  other 
covert  relationsliip  with  the  CIA  at  the  time  of  the  announcement, 
fewer  than  one-half  will  be  terminated  under  the  new  CIA  guidelines. 

About  half  of  the  some  50  CIA  relationships  with  the  U.S.  media 
were  paid  relationships,  ranging  from  salaried  operatives  working 
under  journalistic  cover,  to  U.S.  journalists  serving  as  "independent 
contractors"  for  the  CIA  and  being  ])aid  regularly  for  their  services,  to 
those  who  receive  only  occasional  gifts  and  reimbursements  from  the 
CIA." 

More  than  a  dozen  United  States  neics  organizaHons  and  coimnercial 
jmMishing  houses  formerly  'provided  cover  for  CIA  agents  abroad.  A 
few  of  these  organizations  ivere  unaware  that  they  provided  this 
cover.^^ 

Although  the  variety  of  the  CIA  relationships  with  the  U.S.  media 
makes  a  svstematic  breakdown  of  them  almost  impossible,  former  CIA 
Director  Colby  has  distinguished  among  four  types  of  relationships.^^ 
These  are: 

(1)  Staff  of  general  circulation,  I".S.  news  organizations; 

(2)  Staff  of  small,  or  limited  circulation,  U.S.  publications ; 

(3)  Free-lance,  stringers,  propaganda  writers,  and  employees  of 
U.S.  publishing  houses ; 

(4)  Journalists  with  whom  CIA  maintains  unpaid,  occasional, 
covert  contact. 

Wliile  the  CIA  did  not  provide  the  names  of  its  media  agents  or  the 
names  of  the  media  organizations  with  which  tliey  are  connected,  the 
Committee  reviewed  summaries  of  their  relationships  and  work  with 
the  CIA.  Through  this  review  the  Committee  found  that  as  of  Febru- 
ary 1976: 

(1)  The  first  category,  which  would  include  any  staff  member  of  a 
general  circulation  U.S.  news  organization  who  functions  as  a  paid 
undercover  contact  of  the  CIA,  appears  to  be  virtually  phased  out.  The 


^'According  to  the  CIA,  "accredited"  applies  to  individuals  who  are  "formally 
authorized  by  contract  or  issuance  of  press  credentials  to  represent  themselves 
as  correspondents." 

"  Drawn  from  "operational  case  studies"  provided  to  the  Committee  12/16/75 
and  10/21/75. 

"  For  explanation  of  footnotes,  see  p.  179. 

"On  November  30,  1973,  the  Wnshinnfon  Star-New<>  reported  that  Director 
Colby  had  ordered  a  review  of  CIA  media  relationships  in  September  of  that 
year,  and  reported  that  Colby  would  phase  out  the  first  category  but  maintain 
.iournalists  in  each  of  the  other  three  categories.  In  his  testimony  to  the  House 
Select  Committee  on  Intelligence  on  November  6,  1975,  Colby  made  a  general 
reference  to  these  categories. 


196 

Committee  has  found  only  two  current  relationships  that  fit  this  cate- 
gory, both  of  which  are  being  terminated  under  the  CIA's  Febru- 
ary 11, 1976  stated  policy. 

The  Committee  has  also  found  a  small  number  of  past  relationships 
that  fit  this  category.  In  some  cases  the  cover  arrangement  consisted  of 
reimbursing  the  U.S.  newspaper  for  any  articles  by  the  CIA  agent 
which  the  paper  used.  In  at  least  one  case  the  journalistic  functions 
assumed  by  a  CIA  staff  officer  for  cover  purposes  grew  to  a  point  where 
the  officer  concluded  that  he  could  not  satisfactorily  serve  the  require- 
ments of  both  his  (unwitting)  U.S.  media  employers  and  the  CIA,  and 
therefore  resigned  from  the  CIA.  He  maintained  contact,  how^ever, 
with  the  CIA  and  continued,  very  occasionally,  to  report  to  the  CIA 
from  the  countries  in  w*hich  he  worked. 

(2)  Of  the  less  than  ten  relationships  with  writers  for  small,  or 
limited  circulation,  U.S.  publications,  such  as  trade  journals  or  news- 
letters, most  are  for  cover  purposes. 

(3)  The  third,  and  largest,  category  of  CIA  relationships  with  the 
U.S.  media  includes  free-lance  journalists;  "stringers"  for  newspapers, 
news  magazines  and  news  services;  itinerant  authors;  propaganda 
writers;  and  agents  working  under  cover  as  employees  of  U.S.  pub- 
lishing houses  abroad.  With  the  exception  of  the  last  group,  the 
majority  of  the  individuals  in  this  category  are  bona  fide  writei-s  or 
journalists  or  photographers.  Most  are  paid  by  the  CIA,  and  virtually 
all  are  witting;  few,  however,  of  the  news  organizations  to  which  they 
contribute  are  aware  of  their  CIA  relationships. 

(4)  The  fourth  category  of  covert  relationships  resembles  the  kind 
of  contact  that  journalists  have  with  any  other  department  of  the  U.S. 
Government  in  the  routine  performance  of  their  journftlistic  duties.  No 
money  changes  hands.  The  relationships  are  usually  limited  to  occa- 
sional lunches,  interviews,  or  telephone  conversations  during  which 
information  would  be  exchanged  or  verified.  The  difference,  of  course, 
is  that  the  relationships  are  covert.  The  joun^alist  either  volunteers  or 
is  requested  by  the  CIA  to  provide  some  sort  of  information  about  peo- 
ple with  whom  he  is  in  contact.  In  several  cases,  the  relationship  began 
when  the  journalist  approached  a  U.S.  embassy  officer  to  report  that 
he  was  approached  by  a  foreign  intelligence  officer ;  in  others,  the  CIA 
initiated  the  relationship. 

The  first  major  step  to  impose  restrictions  on  the  use  of  U.S.  journal- 
ists was  taken  by  former  Director  Colby  in  the  fall  of  1973.  According 
to  Mr.  Colby's  letter  to  the  Committee :  " 

(a)  CIA  will  undertake  no  activity  in  which  there  is  a  risk 
of  influencing  domestic  public  opinion,  either  directly  or  in- 
directly. The  Agency  will  continue  its  prohibition  against 
placement  of  material  in  the  American  media.  In  certain  in- 
stances, usually  where  the  initiative  is  on  the  part  of  the 
media,  CIA  will  occasionally  provide  factual  non-attributable 
briefings  to  various  elements  of  the  media,  but  only  in  cases 
where  we  are  sure  that  the  senior  editorial  staff  is  aware  of 
the  source  of  the  information  provided. 


Letter  from  William  Colby  to  the  Select  Committee,  10/21/75. 


197 

(b)  As  a  general  policy,  the  Agency  will  not  make  any 
clandestine  use  of  staff  employees  of  U.S.  publications  which 
have  a  substantial  impact  or  influence  on  public  opinion.  This 
limitation  includes  cover  use  and  any  other  activities  which 
might  be  directed  by  CIA. 

(c)  A  thorough  review  should  be  made  of  CIA  use  of  non- 
staff  journalists ;  i.e.,  stringers  and  free-lancers,  and  also  those 
individuals  involved  in  journalistic  activities  who  are  in  non- 
sensitive  journalist-related  positions,  primarily  for  cover 
backstopping.  Our  goal  in  this  exercise  is  to  reduce  such  usage 
to  a  minimum. 

Mr.  Colby's  letter  specified  that  operational  use  of  staff — that  is,  full- 
time  correspondents  and  other  employees  of  major  U.S.  news  maga- 
zines, newspapers,  wire  services,  or  television  networks — was  to  be 
avoided.  Use  would  be  less  restricted  for  "stringers"  or  occasional 
correspondents  for  these  news  organizations,  as  well  as  for  corre- 
spondents working  for  smaller,  technical,  or  specialized  publications. 

The  public  statement  that  the  CIA  issued  on  February  11,  1976,  ex- 
pressed a  policy  of  even  greater  restraint : 

— Effective  immediately,  CIA  will  not  enter  into  any  paid 
or  contractual  relationship  with  any  full-time  or  part-time 
news  correspondent  accredited  by  any  U.S.  news  service, 
newspaper,  periodical,  radio  or  television  network  or  station. 

— As  soon  as  feasible,  the  Agency  will  bring  existing  rela- 
tionships with  individuals  in  these  groups  into  conformity 
with  this  new  policy. 

— CIA  recognizes  that  members  of  these  groups  (U.S. 
media  and  religious  personnel)  may  wish  to  provide  infor- 
mation to  the  CIA  on  matters  of  foreign  intelligence  of 
interest  to  the  U.S.  Government,  The  CIA  will  continue  to 
welcome  information  volunteered  by  such  individuals.^^ 

From  CIA  testimony  later  that  month,  the  Committee  learned  that 
this  prohibition  extends  to  non- Americans  accredited  to  U.S.  media 
organizations.  Nevertheless,  this  prohibition  does  not  cover  "unaccred- 
ited" Americans  serving  in  U.S.  media  organizations,  or  free-lance 
writers.  As  previously  noted,  the  CIA  has  informed  the  Committee 
that,  of  the  approximately  50  CIA  relationships  with  U.S.  journalists 
or  employees  of  U.S.  media  organizations,  fewer  than  one-half  will  be 
terminated  under  the  new  guidelines.^^ 

3.  Two  Issues :  ^^FalJout^''  and  the  Integrity  of  a  Free  Press 

In  examining  the  CIA's  past  and  present  use  of  the  U.S.  media,  the 
Committee  finds  two  reasons  for  concern.  The  first  is  the  potential,  in- 
herent in  covert  media  operations,  for  manipulating  or  incidentally 


'^  CIA  instructions  interpreting  the  new  policy  explain  that  "the  term  'con- 
tractual' applies  to  any  written  or  oral  agreement  obligating  the  Agency  to 
provide  financial  remuneration  including  regular  salaries,  spot  payments,  or 
reimbursement  of,  out-of-pocket  operational  expenses  or  the  provision  of  other 
material  benefits  that  are  clearly  intended  as  a  reward  for  services  rendered 
the  Agency." 

'"  CIA  response  of  March  17,  1976  (76-0315/1). 


198 

misleading  the  American  public.  The  second  is  the  damage  to  the 
credibility  and  independence  of  a  free  press  which  may  be  caused  by 
covert  relationships  with  U.S.  journalists  and  media  organizations. 
In  his  1967  order  prohibiting  CIA  publication  in  this  country,  then 
Deputy  Director  for  plans  Desmond  FitzGrerald  raised  the  first  issue. 
He  stated: 

Fallout  in  the  United  States  from  a  foreign  publication 
which  we  support  is  inevitable  and  consequently  permis- 
sible. 

In  extensive  testimony,  CIA  employees  both  past  and  present  have 
conceded  that  there  is  no  way  to  shield  the  American  public  from  such 
"fallout."  As  a  former  senior  official  of  the  Agency  put  it  in  testimony : 

There  is  no  way  in  this  increasingly  small  world  of  ours  of 
insulating  information  that  one  puts  out  overseas  and  con- 
fining it  to  the  area  to  where  one  puts  it  out.  .  .  .  When  Brit- 
ish intelligence  was  operating  in  the  last  century,  they  could 
plant  an  outrageous  story  in  some  local  publication  and  feel 
fairly  confident  that  no  one  else  would  ever  hear  about  it, 
that  would  be  the  end  of  it.  .  .  .  That  is  no  longer  the 
case.  Whether  or  not  this  type  of  overseas  activity  should  be 
allowed  to  continue  is  subject  to  differing  views  and  judg- 
ments. My  own  would  be  that  we  would  be  fools  to  relinquish 
it  because  it  serves  a  very  useful  purpose.^^ 

The  same  former  CIA  official  continued : 

If  you  plant  an  article  in  some  paper  overseas,  and  it  is 
a  hard-hittina;  article,  or  a  revelation,  there  is  no  way  of  frnar- 
anteeing  that  it  is  not  going  to  be  picked  up  and  published 
by  the  Associated  Press  in  this  country. ^^* 

The  domestic  fallout  of  covert  propaganda  comes  from  many 
sources;  books  intended  primarily  for  an  English-speaking  foreign 
audience,  press  placements  that  are  picked  up  by  international  wire 
services,  press  services  controlled  by  the  CIA,  and  direct  funding  of 
foreign  institutions  that  attempt  to  propagandize  the  United  States 
public  and  Congress. 

In  the  case  of  books,  substantial  fallout  in  the  U.S.  may  be  a  neces- 
sary part  of  the  propaganda  process.  For  example,  CIA  records  for 
1967  state  that  certain  books  about  China  subsidized  or  even  pro- 
duced by  the  Agency  "circulate  principally  in  the  U.S.  as  a  prelude  to 
later  distribution  abroad."  Several  of  these  books  on  China  were 
widely  reviewed  in  the  United  States,  often  in  juxtaposition  to  the 
sympathetic  view  of  the  emerging  China  as  presented  by  Edgar  Snow. 
At  least  once,  a  book  review  for  an  Agency  book  which  appeared  in 
the  Neio  York  Times  was  written  by  a  CIA  writer  under  contract. 
E.  Howard  Hunt,  who  had  been  in  charge  of  contacts  with  U.S.  pub- 
lishers in  the  late  1960s,  acknowledged  in  testimony  before  this  Com- 
mittee that  CIA  books  circulated  in  the  U.S.,  and  suggested  that  such 
fallout  may  not  have  been  unintentional. 


^  Thomas  H.  KaramesSines  testimony  of  a  former  Deputy  Director  for  plans, 
10/22/75,  p.  46. 

*®'  Former  Deputy  Director  for  plans  testimony,  10/2S/75,  p.  36. 


199 

Question.  But,  with  anything  that  was  publisi  ed  in  Eng- 
lish, the  United  States  citizenry  would  become  a  likely  audi- 
ence for  publication? 

Mr.  Hunt.  A  likely  audience,  definitely. 

Question.  Did  you  take  some  sort  of  steps  to  make  sure  that 
things  that  were  published  in  English  were  kept  out  of  or 
away  from  the  American  reading  public  ? 

Mr.  Hunt.  It  was  impossible  because  Praeger  was  a  com- 
mercial U.S.  publisher.  His  books  had  to  be  seen,  had  to  be 
reviewed,  had  to  be  bought  here,  had  to  be  read. 

Hunt,  If  your  targets  are  foreign,  then  where  are  they? 
They  don't  all  necessarily  read  English,  and  we  had  a  bilateral 
agreement  with  the  British  that  we  wouldn't  propagandize 
their  people.  So  unless  the  book  goes  into  a  lot  of  lan.quaijes 
or  it  is  published  in  India,  for  example,  where  English  is  a 
lingua  franca,  then  you  have  some  basic  problems.  And  I 
think  the  way  this  was  rationalized  by  the  project  review 
board  .  .  .  was'that  the  ultimate  target  was  foreign,  which  was 
true,  but  how  much  of  the  Praeger  output  actually  got  abroad 
for  any  impact  I  think  is  highly  arguable.^^ 

An  American  who  reads  one  of  these  books  which  purportedly  is 
authored  by  a  Chinese  defector  would  not  know  that  his  thoughts 
and  opinions  about  China  are  possibly  being  shaped  by  an  agency 
of  the  United  States  Government.  Given  the  paucity  of  information 
and  the  inaccessibility  of  China  in  the  1960s,  the  CIA'may  have  helped 
shape  American  attitudes  toward  the  emerging  China.  The  CIA  con- 
siders such  "fallout"  inevitable. 

Another  example  of  the  damages  of  "fallout"  involved  two  propri- 
etary news  services  that  the  CIA  maintained  in  Europe.  Inevitably 
these  news  services  had  U.S.  subscribers.  The  larger  of  the  two  was 
subscribed  to  by  over  30  U.S.  newspapers.  In  an  effort  to  reduce  the 
problem  of  fallout,  the  CIA  made  a  senior  official  at  the  major  U.S. 
dailies  aware  that  the  CIA  controlled  these  two  press  services. 

A  serious  problem  arises  from  the  possible  use  of  U.S.  publications 
for  press  placements.  Materials  furnished  to  the  Committee  describe 
a  relationship  which  po«es  this  problem.  It  began  in  August  1967 — 
after  the  Katzenbach  Committee  recommendations — and  continued 
until  May  1974.  In  this  case,  a  U.S. -based  executive  of  a  major  U.S. 
newspaper  was  contacted  by  the  CIA  "on  a  confidential  basis  in  view 
of  his  access  to  information  of  intelligence  and  operational  interests." 
The  news  executive  sers^ed  as  a  witting,  unpaid  collaborator  for  intel- 
ligence collection,  and  received  briefings  from  the  CIA  which  "were  of 
porfessional  benefit"  to  him.  The  CIA  materials  state  that : 

It  was  visualized  that  .  .  .  propaganda  (if  agreeable  to 
him)  might  be  initially  inserted  in  his  paper  and  then  be 
available  for  reprinting  by  Latin  American  news  outlets.  .  .  . 
There  is  no  indication  in  the  file  that  Subject  agreed  ...  or 
that  he  did  place  propaganda  in  his  newspaper.^'^ 

"•  E.  Howard  Hunt  testimony,  1/10/76  pp.  73,  74. 
•'  CIA  Operational  case  study  #14. 


200 

The  danger  of  CIA  propaganda  contaminating  U.S.  media — "fall- 
out"— occurs  in  viilually  any  instance  of  propaganda  use.  The  pos- 
sibility is  quite  real  even  when  the  CIA  does  not  use  any  U.S.  journal- 
ist or  publication  in  carrying  out  the  propaganda  project.  Where  a 
CIA  propaganda  campaign  causes  stories  to  appear  in  many  pres- 
tigious news  outlets  around  the  world,  as  occurred  at  the  time  of  the 
Chilean  elections  in  1970,  it  is  truly  impossible  to  insulate  the  United 
States  from  propaganda  fallout. 

Indeed,  CIA  records  for  the  September-October  1970  propaganda 
effort  in  Chile  indicate  that  "replay"  of  propaganda  in  the  U.S.  was 
not  unexpected.  A  cable  summary  for  September  25, 1970  reports : 

Sao  Paulo,  Tegucigalpa,  Buenos  Aires,  Lima,  Monte\ddeo, 
Bogota,  Mexico  City  report  continued  replay  of  Chile  theme 
materials.  Items  also  cai-ried  in  New  York  Times^  Washington 
Post.  Propaganda  activities  continue  to  generate  good  cover- 
age of  Chile  developments  along  our  theme  guidance.  .  .  .^^ 

The  fallout  problem  is  probably  most  serious  when  the  U.S.  public 
is  dependent  on  the  "polluted"  media  channel  for  its  information 
on  a  particular  subject.  When  news  events  have  occurred  in  relatively 
isolated  parts  of  the  world,  few  major  news  organizations  may  have 
been  able  to  cover  them  initially,  and  world-wide  coverage  reflects 
whatever  propaganda  predominates  in  the  media  of  the  area. 

Another  situation  in  which  the  effects  of  "fallout"  in  the  United 
States  may  be  significant  is  that  in  which  specialized  audiences  in  the 
United  States — area  study  specialists,  for  example — may  unknowingly 
rely  heavily  on  materials  produced  by,  or  subsidized  by,  the  CIA.  The 
danger  of  this  form  of  dependence  is  less  now  than  it  had  been  prior 
to  the  freer  flow  of  Western  travelers  to  the  Soviet  Union,  Eastern 
Europe  and  China. 

In  its  inquiry  into  the  activities  of  a  Vietnamese  institution  the 
Committee  discovered  a  particularly  unfortunate  example  of  domestic 
fall-out  of  covert  propaganda  activities.  The  institution  was  a  CIA- 
inspired  creation.  The  intention  of  the  CIA,  according  to  its  own 
records,  was  not  to  undertake  propaganda  against  the  United  States. 
Whatever  the  design,  the  propaganda  effort  had  an  impnct  on  the 
American  public  and  congressional  opinion.  The  CIA  provided  $170,- 
000  per  year  in  1974  and  1975  for  the  sunport  of  this  institution's  pub- 
lications. The  embassy  in  the  United  States  distributed  the  magazine 
to  American  readers,  including  the  offices  of  all  United  States  Con- 
gressmen and  Senators.  The  institution  on  at  least  one  occasion  invited 
a  group  of  American  Congressmen  to  Vietnam  and  sponsored  their 
activities  on  at  least  part  of  their  trip.  Through  this  institution  the 
CIA — however  inadventently — engaged  in  propagandizing  the  Amer- 
ican public,  including  its  Congress,  on  the  controversial  issue  of  U.S. 
involvement  in  Vietnam. 

One  particular  kind  of  possible  "fallout"  has  aroused  official  concern. 
That  is  fallout  upon  the  IT.S.  Government  of  the  CIA's  "black  nror.a- 
gnada" — propaganda  that  appears  to  originate  from  an  unfriendly 
source.  Because  the  source  of  black  propaganda  is  so  fully  concealed, 
the  CIA  recognizes  that  it  risks  seriously  misleading  tJ.S.  policy- 

^  Chile  Task  Force  Log  (R597) . 


201 

makers.  An  Agency  regulation  specifies  that  the  Directorate  of  Opera- 
tions should  notify  appropriate  elements  of  the  DDI  and  the  In- 
telligence Community  if  the  results  of  a  black  operation  might  in- 
fluence the  thinking  of  senior  U.S.  officials  or  affect  U.S.  intelligence 
estimates.  Regular  coordination  between  the  CIA  and  the  State  De- 
partment's INR  has  been  instituted  to  prevent  the  self-deception  of 
"senior  U.S.  officials"  through  black  propaganda.  It  should  be  noted 
that  this  procedure  applies  only  to  black  propaganda  and  only  to 
"senior  U.S.  officials."  No  mechanism  exists  to  protect  the  U.S.  public 
and  the  Congress  from  fallout  from  black  propaganda  or  any  other 
propaganda. 

The  Committee  recognizes  that  other  countries  make  extensive  use 
of  the  international  media  for  their  propaganda  purposes.  The  United 
States  public  is  not  insulated  from  this  propaganda  either.  It  is  clear, 
however,  that  the  strongest  defense  a  free  country  has  from  propaganda 
of  any  kind  is  a  free  and  vigorous  press  that  expresses  diverse  points  of 
view.  Similarly,  the  most  effective  way  for  this  country  to  respond  to 
the  use  of  propaganda  abroad  is  to  permit  American  journalists  and 
news  organizations  to  pureue  their  work  without  jeopardizing  their 
credibility  in  the  eyes  of  the  world  through  covert  use  of  them. 

C.  Covert  Use  of  U.S.  Religious  Groups 

The  Committee  considers  religious  groups — like  academia  and  the 
press — to  be  among  the  most  important  of  our  society's  institutions. 
As  such,  any  covert  relationship  that  might  either  influence  them  or 
jeopardize  their  reputation  is  extremely  sensitive.  Moreover,  opera- 
tional use  of  U.S.  religious  organizations  differs  from  the  use  of  other 
elements  of  U.S.  society.  It  is  a  special  case,  in  that  virtually  all  re- 
ligions are  inherently  supra-national.  Making  operational  use  of  U.S. 
religious  groups  for  national  purposes  both  violates  their  nature  and 
undermines  their  bonds  with  kindred  groups  around  the  world. 

In  its  examination  of  CIA  relationships  with  domestic  institutions, 
the  Committee  has  focused  exclusively  on  the  use  of  U.S.  religious  or- 
ganizations. 

1.  RestHcticms  on  the  Use  of  Religious  Personnel 

The  CIA  guidelines  issued  in  the  wake  of  the  Katzenbach  Com- 
mittee report  required  prior  approval  bv  the  DDO  for  operational  use 
of  any  employee,  staff  member,  or  official  of  a  U.S.  educational  or  pri- 
vate organization.  This  restriction  applied  to  operational  use  of  these 
individuals  who  were  affiliated  with  American  religious  organizations. 
The  CIA  has  provided  the  Committee  with  no  other  regulations  that 
apply  specifically  to  the  use  of  religious  groups.  In  a  letter  to  this  Com- 
mittee, however,  Mr.  Colby  stated  that  the  CIA  used  religious  groups 
with  great  caution,  and  that  their  use  required  special  approval  within 
the  Agency : 

Denutv  Director  for  Operations  regulations  require  the 
Denuty  Director  for  Operations'  annroval  for  the  u«e  of  re- 
ligious groups.  He  has  the  resnonsibilitv  of  ensuring  that 
such  operational  use  avoids  infringement  or  damage  to  the 
individual  religious  personnel  involved  in  their  group.  Such 


9-983  O  -  76  -  14 


202 

use  is  carefully  weighed  and  approvals  in  recent  years  have 
been  relatively  few  in  number.^^ 

On  February  11, 1976,  the  CIA  announced : 

CIA  has  no  secret  paid  or  contractual  relationship  with  any 
American  clergyman  or  missionary.  This  practice  will  be 
continued  as  a  matter  of  policy. 

The  CIA  has  assured  the  Committee  that  the  prohibition  against  "all 
paid  or  contractual  relationships"  is  in  fact  a  prohibition  against  any 
operational  use  of  Americans  following  a  religious  vocation. 

£.  Scope  of  Relationships 

The  number  of  American  clergy  or  misionaries  used  by  the  CIA  has 
been  small.  The  CIA  has  informed  the  Committee  of  a  total  of  14 
covert  arrangements  which  involved  direct  operational  use  of  21 
individuals. 

Only  four  of  these  relationships  were  current  in  August  1975,  and 
according  to  the  CIA,  they  were  used  only  for  intelligence  collection, 
or,  in  one  case,  for  a  minor  role  in  preserving  the  cover  of  another 
asset. 

The  other  ten  relationships  with  U.S.  religious  personnel  had  been 
terminated  before  August  1975;  four  of  them  ended  within  the  last 
five  years.  In  six  or  seven  cases,  the  CIA  paid  salaries,  bonuses,  or  ex- 
penses to  the  religious  personnel,  or  helped  to  fund  projects  run  by 
them. 

Most  of  the  individuals  were  used  for  covert  action  purposes.  Sev- 
eral were  involved  in  large  covert  action  projects  of  the  mid-sixties, 
which  were  directed  at  "competing"  with  communism  in  the  Third 
World. 

3.  Issites : '''' Fallout^''  Violation  of  Trust 

As  several  of  the  relationships — all  terminated — involved  the  reli- 
gious personnel  in  media  activity,  some  of  the  same  concerns  must  be 
voiced  as  when  U.  S.  journalists  are  used  covertly.  The  danger  of 
U.S.  "fallout"  of  CIA  propaganda  existed  in  three  or  four  of  the 
relationships  with  U.S.  religious  personnel. 

The  more  serious  issue,  however,  is  the  question  of  the  confiden- 
tiality of  the  relationships  among  members  of  the  clergy  and  their 
congregations. 

Of  the  recent  relationships,  the  most  damaging  would  appear  to  be 
that  of  a  U.S.  priest  serving  the  CIA  as  an  informant  on  student  and 
religious  dissidence. 

Of  the  earlier  cases,  one  exemplifies  the  extent  to  which  the  CIA 
used  confidential  pastoral  relationships.  The  CIA  used  the  pastor 
of  a  church  in  a  Third  World  country  as  a  "principal  agent"  to  carry 
out  covert  action  projects,  and  as  a  spotter,  assessor,  asset  developer, 
and  recruiter.  He  collected  information  on  political  developments 
and  on  personalities.  He  passed  CIA  propaganda  to  the  local  press. 
According  to  the  CIA's  description  of  the  case,  the  pastor's  analyses 
were  based  on  his  lon<r-term  friendships  with  the  personalities,  and 
the  agents  under  him  were  "well  known  to  him  in  his  professional  life." 
At  first  the  CIA  provided  only  occasional  gifts  to  the  pastor  in  return 

=®  Letter  from  William  Colby  to  the  Select  Committee,  10/21/75. 


203 

for  his  services ;  later,  for  over  ten  years,  the  CIA  paid  him  a  salary 
that  reached  $11,414  annually. 

4.  The  CIA  aid  U.S.  Religious  Organizations  and  Personnel:  Conclu- 
sions and  Recom/mendations 

The  Committee  welcomes  the  policy,  announced  by  the  CIA  on 
February  11,  1976,  that  prohibits  any  operational  use  of  Americans 
followino;  a  religious  vocation. 

The  fact  that  relatively  few  American  clergy  or  missionaries  have 
been  used  by  the  CIA  suggests  that  neither  this  country's  capacity  to 
collect  intelligence  nor  its  covert  action  capability  would  be  seriously 
affected  by  a  total  ban  on  their  operational  use.  Therefore,  the  Com- 
mittee recommends  that  the  CIA's  recent  prohibition  on  covert  paid  or 
contractual  relationships  between  the  Central  Intelligence  Agency 
and  any  American  clergyman  or  missionary  should  be  established  by 
law. 


XI.  PROPRIETARIES 

Proprietaries  are  business  entities,  wholly  owned  by  the  Central 
Intelligence  Agency,  which  either  actually  do  business  as  private 
firms,  or  appear  to  do  business  under  commercial  guise.  They  are  part 
of  the  "arsenal  of  tools"  the  CIA  believes  it  must  have  to  be  an  effec- 
tive intelligence  component.^  In  recent  years,  particularly  during  the 
Vietnam  War,  serious  questions  were  raised  about  this  proprietary 
capability. 

Much  of  the  accompanying  criticism  stemmed  from  a  lack  of  un- 
derstanding of  the  role  of  proprietaries  in  both  United  States  foreign 
policy  and  the  intelligence  operations.  Some  of  the  criticism  arose  from 
the  suspected  entrance  of  proprietaries  into  areas  where  they  would  be 
in  competition  with  legitimate  business  interests,  such  as  the  airline 
industry.  It  has  been  feared  that  their  profits  were  used  to  provide 
secret  funding  for  covert  operations,  thus  avoiding  scrutiny  by  the  Ex- 
ecutive and  the  Con.qrress  through  a  "back  door"  funding  process. 

In  addition,  there  have  been  allegations  that  the  domestic  impact  of 
these  entities  has  effectively  violated  the  Agency's  charter,  which  gen- 
erally proscribes  domestic  activity  of  a  police  or  internal  security 
nature.  Concerns  have  been  expressed  that  favored  treatment  has  been 
given  these  proprietaries  by  other  Government  agencies,  such  as  the 
Internal  Revenue  Service  and  the  Civil  Aeronautics  Board.  The  fact 
that  the  size  and  number  of  these  mechanisms  is  unknown  has  caused 
concern  about  potentially  pervasive  influence  on  the  free  enterprise 
system.  Questions  have  arisen  about  whether  Agency  policy  included 
using  these  entities  to  engage  in  illegal  activities  to  make  profits  which 
could  be  used  to  fund  clandestine  operations.  Most  notably,  the  latter 
charges  have  involved  allegations  that  the  Agency's  air  proprietaries 
were  involved  in  drug  trafficking.^ 

Concern  has  been  expressed  about  the  Agency's  financial  and  man- 
agement control  over  proprietaries  and  about  the  treatment  of  funds 
related  to  such  entities,^  It  is  understandable  that  there  would  be  mis- 
givings and  suspicion,  since  much  that  would  have  explained  the  role 
of  these  proprietaries  has  remamed  classified.  The  Committee  has, 
nonetheless,  been  able  to  conduct  broad  review  of  these  operations. 
This  review  has  included  examination  of  documents  at  the  CIA,  and 
testimony  from  present  and  former  Agency  employees. 

In  general,  these  mechanisms  have  operated  with  a  proper  concern 
for  legality,  propriety  and  ethical  standards  at  the  headquarters  level. 
The  deviations  that  have  occurred  were  in  the  field  and  generally  in 


'Testimony  of  Chief  of  Cover  and  Commercial  Staff  (CCS),  1/27/76,  p.  20. 

*  The  Committee  found  no  substance  to  these  charges. 

'  A  careful  review  has  revealed  that  the  CIA's  proprietaries  are  appropriately 
limited  and  controlled  with  careful  considered  given  to  restrict  their  use  within 
the  spirit  and  letter  of  the  law  by  headquarters-level  personnel. 

(205) 


206 

the  area  of  operators,  rather  than  management  personnel.  More- 
over, the  use  and  past  expansion  of  the  proprietaries  was  a  direct 
result  of  demands  placed  upon  the  Agency  by  Presidents,  Secretaries 
of  State  and  the  policy  mechanisms  of  government.  This  is  particu- 
larly true  of  the  large  air  proprietary  complex  used  to  support  para- 
military operations  in  Southeast  Asia.  The  only  exception  to  this 
pattern  is  the  insurance  complex,  which  was  partially  established  on 
Agency  initiatives  to  fill  a  pressing  need. 

A  conceptual  problem  which  continually  confronts  the  intelligence 
community,  applies  with  full  force  in  the  proprietary  area.  As  certain 
kinds  of  covert  action  were  developed  to  deal  with  the  perceived  com- 
munist threat,  the  use  of  certain  mechanisms  had  to  be  limited.  In  a 
totalitarian  society  for  example,  governmental  and  "private"  enter- 
prises are  essentially  one.  The  government  can  and  does  use  these  en- 
tities for  intelligence  and  other  official  purposes.  In  our  society,  how- 
ever, that  which  is  governmental  is  generally  distinct  from  that  which 
is  private.  Traditionally,  problems  have  developed  when  the  govern- 
ment has  crossed  into  the  private  sector.  Proprietaries  are  no  exception 
to  this  dilemma.  They  are,  in  fact,  the  embodiment  of  it. 

Thus,  the  fundamental  question  presented  in  this  portion  of  the  Com- 
mittee's inquiry  is :  can  a  free  and  open  society  tolerate  such  a  conflu- 
ence of  conflicting  roles?  The  Committee  concludes  that  it  can,  pro- 
vided that  the  Congress  plays  a  role  in  the  supervision  of  these  mech- 
anisms to  ensure  that  the  delicate  balance  struck  in  our  society  between 
governmental  and  private  actions  is  maintained.  Wliile  there  may  have 
been  a  temptation  to  view  proprietaries  as  "abusive"  /;er  se^  this  atti- 
tude was  eschewed  by  the  Committee.  Although  there  are  potential 
problems  with  proprietaries,  the  Committee  feels  that  aggressive  over- 
sight can  protect  the  rights  of  American  citizens  and  institutions  with- 
out the  need  for  a  ban  on  the  use  of  proprietaries  which  serve  a 
legitimate  intelligence  function. 

A.  Overview 

Acting  under  broad  authority  granted  them  by  the  National  Secu- 
rity Act  of  1947  and  Central  Intelligence  Act  of  1949,  the  various 
Directors  of  Central  Intelligence  have  established  proprietaries  (Gov- 
ernment-owned business  enterprises,  foundations  and  quasi-business 
enterprises)  to  serve  a  variety  of  intelligence  and  covert  action  pur- 
poses. Chief  among  those  purposes  have  been : 

1.  Provision  of  Cover  for  Intelligence  CoUectimi  and  Action  Projects 
Commercial  firms  established  in  foreign  countries  provide  plausible 

reasons  for  the  presence  of  CIA  case  officers.  Agency-funded  founda- 
tions serve  as  conduits  of  funds  for  a  variety  of  purposes,  including 
clandestine  activities  and  contributions  to  scholars  conducting  research 
which  supports  United  States  foreign  policy  positions. 

2.  Extension  of  Agency  Influence  and  Information  Network  in  Over- 

seas Business  Community 
The  very  act  of  establishing  a  proiirietary  firm  requires  banking, 
insurance,  and  other  services.  Acquiring  these  services  entails  support, 
communications,  and  intimate  business  relationships  with  bona  fide 


207  / 

commercial  entities  here  and  abroad.  At  a  minimum,  these  relation- 
ships require  the  clearance  of  those  in  top  management  positions  for 
access  to  CIA  business.  On  occasion  this  relationship  includes  the 
Agency  using  commercial  contacts  for  information  or  assistance. 

3.  ProTision  of  Sufportinq  Services  for  Co^^ert  Operations 

In  paramilitary  operations,  airlift  and  sealift  bv  Agency-owned 
carriers  has  many  advantages :  flexibility,  security,  ability  to  implant 
technical  collection  devices,  etc.  CIA  agents,  wlio  engage  in  haz- 
ardous activities  which  would  ordinarily  make  them  uninsurable,  can 
obtain  commercial  insurance  at  standard  or  subsidized  rates  via  a  con- 
glomerate of  CIA-ownod  insurance  companies.  In  foreign  locations 
where  actual  contact  with  the  nearest  CIA  station  is  not  operationally 
discreet,  proprietaries  provide  payroll  channels  and  other  administra- 
tive services  for  Agencv  personnel.  Firms  based  in  locations  with  per- 
missive corporate  laws  and  regulations  can  also  engage  in  many 
activities  unrelated  to  their  charters.  For  example,  insurance  firms  can 
acquire  real  estate  for  operational  purposes  on  a  non-attributed  basis. 

li.  Operation  of  Propaganda  Mechanisms 

In  establishing  the  clandestine  radios  (Radio  Free  Europe  and 
Radio  Liberty)  in  the  1950s,  the  CIA  acquired  a  means  of  directly 
influencing  populations  behind  the  Iron  Curtain.  These  proprietaries 
were  eventually  disposed  of  and  placed  under  the  aegis  of  the  Depart- 
ment of  State. 

5.  Management  of  Private  Investments 

The  Agency  would  denv  that  private  investment  is  a  purpose  of 
proprietaries.  Agency  officials  state  that  standing  policy  prohibits  the 
investment  of  CIA  operational  funds  in  the  private  sector  without  ex- 
plicit authorization  by  the  DCI.  Actually,  the  existence  of  proprietary 
enterprises  which  occasionallv  returned  sizable  profits,  indicates  that 
private  investment  may  indeed  have  been  a  widespread  Agency  policy. 
Moreover,  the  Agencv  has  specifically  authorized  its  insurance  com- 
plex to  act  as  an  institutional  investor  for  its  own  funds  and  those  of 
other  proprietaries.  Thus,  the  extent  of  private  investment  by  the 
Agency  is  actually  a  question  of  definition  and  shading. 

B.  Structure 

Proprietaries  fall  into  two  broad  categories : 

(1)  Operating  companies  which  actually  do  business  as 
private  firms ;  and 

(2)  Non-operating  companies  which  appear  to  do  business 
under  commercial  guise. 

These  entities  mav  be  le.crally  constituted  as  corporations,  partner- 
ships, or  sole  proprietorships ;  or  they  may  have  no  such  legal  standing, 
i.e.,  they  may  be  "notional"  entities  financed  by  the  Agency.  Corporate 
proprietaries  are  incorporated  in  accordance  with  the  statutory  pro- 
visions of  the  jurisdiction  of  incorporation,  are  subject  to  the  same 
review  as  any  corporate  entity  within  that  jurisdiction,  file  applicable 
state  and  Federal  tax  returns,  and  obtain  the  necessary  licenses  to 
conduct  business. 


208 

Both  operating  and  non-operating  companies  serve  two  purposes: 

(1)  they  provide  cover,  attribution  for  funding,  and  administrative 
assistance  to  agents  and  clandestine  activities;  and  (2)  they  provide 
services  not  available  through  normal  commercial  facilities.  Because 
these  instrumentalities  are  established  as  private  organizations,  they 
must  be  organized  and  managed  in  accordance  with  normal  business 
practices  and  requirements  for  the  types  of  enterprises  they  appear 
to  be. 

The  Agency  has  generally  employed  proprietaries  when  they  have 
been  the  only  way,  or  clearly  the  best  way,  to  achieve  an  approved  ob- 
jective. Under  Agency  rules  proprietaries  are  established  or  allowed 
to  continue  only  so  long  as  they  contribute  to  accomplishment  of  the 
CIA's  mission,  and  remain  the  most  effective  means  to  achieve 
Agency  objectives.  While  current  policy  does  limit  the  use  of  oper- 
ating proprietary  mechanisms,  the  Agency  does  retain  its  capability 
to  use  these  mechanisms,  although  it  limits  the  size  of  the  actual  en- 
tities being  maintained. 

A  review  of  Agency  files  shows  that  the  number  of  operating  pro- 
prietaries has  been  consciousl}^  pared  by  about  50  percent  since  the 
mid-1960s.  These  reductions  were  the  result  of  both  the  Katzenbach 
guidelines  associated  with  the  National  Student  Association  disclosures 
in  1967,  and  a  survey  conducted  by  the  CIA  Inspector  General  in  that 
same  year.  In  addition,  the  need  for  proprietaries  has  declined  as  a 
result  of:  (1)  a  general  shift  in  emphasis  away  from  covert  action; 

(2)  the  transfer  of  Radio  Free  Europe  and  Radio  Liberty  to  the  Board 
of  International  Broadcasting  with  funding  through  State  Depart- 
ment; (8)  the  liquidation  of  the.  assets  of  the  Air  America  complex 
as  requirements  for  CIA  support  in  Southeast  Asia  diminished ;  (4) 
the  sale  of  Southern  Air  Transport  and  the  liquidation  of  assets  of 
Intermountain  Aviation  with  their  exposure  in  the  press;  and  (5)  a 
change  in  the  Agency's  approach  to  contingency  requirements. 

The  evidence  received  by  the  committee  indicates  that  the  activities 
of  all  agency  proprietaries  support  the  CIA's  foreign  intelligence 
collection  or  covert  action  missions.  Some  proprietaries  are  located 
within  the  I"^nited  States  for  reasons  of  oi^erational  or  administrative 
necessitv.  thus  there  is  a  domestic  infrastructure,  but  their  ultimate 
impact  is  overseas.  Some  of  the  questionable  domestic  uses  of  these  en- 
tities are  detailed  in  the  sections  of  this  Report  on  "MERRIMAC" 
and  related  i^rograms.*  In  one  area,  the  insurance  complex,  serious 
questions  remain  as  to  the  propriety  of  using  such  a  mechanism  to 
provide  insurance  and  retirement  benefits  for  agency  employees. 

1.  Operating  Proprietaries 

Operating  proprietaries  conduct  business  in  t^-<e  commercial  sphere. 
"WHiile  they  may  compete  directly  with  privately-owned  corporations 
such  competition  is  limited  by  tlie  agency  so  that  private  companies 
will  not  be  deprived  of  substantial  income.  The  Agency  has  been 
careful  to  limit  the  amount  of  commercial  business  ensraeed  in  by 
these  proprietaries  to  that  necessarv  to  support  the  viability  of  the 
commercial  cover.  Revenues  have  been  used  to  partially  offset  operat- 
ing costs,  and  aggi-egate  profits  over  the  yeare  have  been  relatively 


*  See  the  Select  Committee's  detailed  feport  on  CHAOS. 


209 

small.  Only  two  proprietaries  have  shown  significant  profits :  the  Air 
America  complex,  primarily  by  fulfilling  Government  contracts  in 
Southeast  Asia ;  and  the  insurance  company,  by  handling  trust  funds 
and  insurance. 

Depending  upon  the  functions  they  perform,  operating  proprietaries 
vary  in  terms  of  capitalization  and  total  assets.  When  the  commercial 
pur-pose  of  an  operating  proprietary  is  incidental  to  its  CIA  mission 
(such  as  an  export-import  firm  which  engages  in  commercial  opera- 
tions only  to  the  extent  necessary  to  provide  cover  for  a  CIA  officer 
in  a  foreign  country)  a  minimum  capitalization,  usually  in  the  neigh- 
borhood of  $25,000  or  less,  is  all  that  is  required. 

Operating  proprietaries  whose  commercial  purposes  are  in  them- 
selves essential  to  the  CIA  mission  require  much  larger  capitalization 
and  investment.  They  are  staffed  by  Agency  personnel  and  cleared 
commercial  employees.  Among  the  Agency's  operating  proprietaries 
of  this  type  are  a  few  management  companies  and  non-operating 
proprietaries  with  substantial  assets.  The  Agency's  largest  operating 
proprietaries  have  been  Air  America,  the  insurance  complex,  and 
Intermountain  Aviation,  Inc. 

Air  America,  the  Agency's  largest  proprietary,  provided  air  sup- 
port for  CIA  operations  in  Southeast  Asia.  This  support  was  under 
cover  of  a  commercial  flying  service  fulfilling  I"''nited  States  Govern- 
ment contracts.  Corporate  headquarters  were  in  Washington,  D.C., 
with  field  headquarters  in  Taipei,  Taiwan. 

■  The  insurance  complex  provides  a  mechanism  for  both  the  payment 
of  annuities  and  other  benefits  to  sensitive  agents,  and  self -insurance 
of  risks  involved  in  covert  operations.  The  complex  was  formed  in 
1962  as  a  clandestine  commercial  support  mechanism  to  provide  death 
and  disability  benefits  to  agents  or  their  beneficiaries  when  security 
considerations  precluded  payments  which  might  be  attributable  to 
the  United  States  Government.  This  function  wns  broadened  to  in- 
clude assumption  of  many  risks  incurred  by  operational  activities.  The 
complex  has  administered  agents'  escrow  accounts  and  life  insurance, 
and  provided  annuity  and  pension  programs  for  selected  agent  per- 
sonnel employed  by  the  Agency.  These  programs  are  solely  for  the 
purpose  of  meeting  the  Agency's  obligations  to  personnel  who  have 
rendered  services  over  a  substantial  period  of  time,  and  who  are  not 
eligible  for  normal  United  States  Government  retirement  programs. 

Individuals  who  qualify  for  the  CIA  Retirement  Svstem  or  the  Civil 
Service  System  are  not  handled  through  the  proprietary  system.  The 
complex  has  also  been  used  to  pro\ade  a  limited  amount  of  support 
to  covert  operations — specifically,  for  the  acquisition  of  operational 
real  estate  and  as  a  conduit  for  the  funding  of  selected  covert 
activities. 

Intermountain  Aviation,  Inc.  provided  a  variety  of  nonattributable 
air  support  capabilities  which  were  available  for  quick  deployment 
overseas  in  support  of  Agency  activities.  The  assets  of  Intermountain 
have  been  sold,  with  operations  ceasing  February  28,  1975,  and  the 
corporation  is  in  the  process  of  being  dissolved. 

The  combined  net  worth  (assets  minus  liabilities)  of  the  operating 
proprietary  companies  is  approximately  $57.3  million.  Although  some 


210 

are  commercially  self-supporting,  such  as  those  in  the  insurance  com- 
plex, most  of  these  companies  usually  require  budgetary  support. 

Three  of  these  operating  proprietaries  will  be  described  in  the 
following  pages  to  indicate:  why  they  came  into  existence;  what  they 
did;  the  management,  operations  and  control  environment  in  which 
they  operated;  and  what  impact  they  may  have  had  on  the  private 
sector.  In  addition,  this  discussion  will  supply  the  necessary  factual 
rerercprf^  for  the  Committee's  recommendations.  ThCvSe  recommenda- 
tions reflect  the  considered  judgments  of  the  Committee,  which  were 
fonnulated  after  hearing  the  views  of  current  and  former  CIA  em- 
ployees, and  those  of  other  knowledgeable  individuals. 

The  tiecurity  froject 

In  1958,  at  the  time  construction  of  the  new  CIA  headquarters 
building  in  Langley  was  initiated,  a  small  counterintelligence  opera- 
tion was  established  to  maintain  surveillance  of  the  site  to  prevent 
hostile  penetration  and  sabotage.  It  was  successful  in  its  objectives 
and,  upon  occupancy  of  the  building  in  1962,  the  Security  Project 
was  established. 

From  a  single  office  in  Virginia  the  project  expanded  to  four  field 
offices  and  grew  from  a  single  firm  into  three  separate  corporations. 
The  parent  organization  operated  in  the  greater  Washington  area. 
This  operating  proprietary  was  a  commercial  corporation  which  per- 
formed security  services  on  a  competitive  basis.  The  firm  also  con- 
ducted operations  for  the  CIA's  Office  of  Security,  This  operation  was 
successful,  with  customers  utilizing  the  proprietary  for  document 
destruction,  consultation,  guard  work,  and  security  clearance  investi- 
gations. 

This  company  developed  business  contracts  with  agencies  of  the 
Federal  Government  and  commercial  firms.  Because  the  provisions 
of  the  "Anti-Pinkerton  Act"  ^  prohibit  a  company  engaged  in  investi- 
gative work  from  contracting  with  the  Federal  Government,  the 
Agency  formed  a  separate  company  to  manage  commercial  firms  as 
funding  mechanisms  for  investigative  work  levied  by  the  Office  of 
Security.  The  new  company  was  headquartered  in  California.  As 
activity  expanded  and  work  increased,  a  third  corporation  was  orga- 
nized and  headnnartered  in  California. 

In  early  1966,  the  original  company  merged  with  the  third 
firm,  which  remained  incorporated  in  the  state  of  California.  The 
con^orate  officers  and  the  board  of  directors  of  all  three  companies 
consisted  of  the  same  persons.  Subsequently,  the  merged  corporation 
was  sold  and  new  legal  straw  men  were  introduced  as  officers,  directors 
and  shareholders.  In  March  1966,  a  new  home  office  was  established 
in  Virginia  to  enhance  administrative  efficiency,  monetary  controls, 
and  cover  viability.  This  "home  office,"  with  its  investigative  charter, 
has  been  used  to  conduct  covert  investigations. 

In  addition  to  conducting  investigations,  the  project  was  used  in 
the  following  activities : 

(1)  Covert  monitoring  of  construction  of  CIA  headquarters 
building; 

(2)  Monitoring  of  construction  of  buildings  which  were  to  be 
occupied  by  Agency  components ; 

'5U.S.C.  3108.       \ 


211 

(3)  Covert  monitoring  of  construction  of  CIA  printing  services 
building; 

(4)  Surveillance  of  Department  of  Defense  civilian  employees 
suspected  of  being  potential  defectors  to  the  Soviet  Union ; 

(5)  Testing  security  effectiveness  at  domestic  Directorate  of  Science 
and  Technology  sites  and  contractor  facilities; 

(6)  MERRIMAC — monitoring  of  dissident  groups  in  Washington, 
D.C.;« 

(7)  Hiring  and  paying  contract  guards ; 

(8)  Contracting  with  a  civilian  firm  for  the  guard  force  at  an 
installation ; 

(9)  An  operation  to  recruit,  process  and  train  undercover  internal 
security  agents  for  the  Bureau  of  Narcotics  and  Dangerous  Drugs ; 

(10)  Security  support  for  Directorate  of  Science  and  Technology 
proie-'ts  consisting  mainly  of  badging  and  entry  controls,  background 
investigations,  and  escort  of  sensitive  material — this  is  the  only  such 
activity  currently  being  serviced  by  the  project; 

(11)  Physical  surveillance  of  an  Agency  courier  suspected  of  living 
beyond  his  means  including  a  surreptitious  entry  into  his  apartment ; 

(12)  Physical  surveillance  of  an  Agency  employee  "who  maintained 
contact  with  people  of  questionable  loyalty"  including  an  audio 
penetration  of  the  employee's  apartment  and  a  mail  cover. 

Only  one  office  is  currently  in  operation  as  part  of  the  project.  Over 
the  past  years,  its  commercial  projects  have  included  badging  opera- 
tions for  private  companies,  i.e.,  airlines,  schools,  etc.  The  company 
has  never  made  a  true  profit.  To  maintain  its  image  among  its  competi- 
tors, however,  its  books  reflect  a  small  profit  on  which  Federal  and 
state  taxes  are  paid.  The  office  presently  employs  four  staff  agents, 
five  contract  agents  and  fourteen  proprietary  employees.  During  fiscal 
year  1974,  the  project  expended  2.9  percent  of  the  Office  of  Security 
budget. 

As  noted,  this  security  project  has  provided  the  Office  of  Security 
and  Agency  operators  support  on  sensitive  covert  operations  and 
investigative  matters,  counterintelligence  and  counterespionage  sup- 
port for  Agency  components,  custodial  support,  technical  and  physical 
support  in  surveillances,  and  Agency  proprietary  support.  The  project 
has  also  conducted  soecial  nongovernmental  and  sensitive  inquiries. 
Its  commercial  activities  have  included :  internal  security  management, 
security  surveys,  counteraudio  measures  and  inspection,  management 
of  security  protective  equipment  and  devices,  classified  material  stor- 
age, secure  destruction  of  classified  waste,  incinerator  equipment  sales, 
personnel  investifrations,  and  industrial  undercover  activities. 

A  unique  example  of  its  Agency  security  function  was  a  project 
which  utilized  both  security  "probes"  and  security  "penetrations,"  A 
security  probe  is  a  test  of  the  current  effectiveness  of  a  security  svstem 
within  an  Agency  installation.  A  security  penetration  is  an  internal 
investigation  and  search  which  attempts  to  locate  subversive  elements 
at  a  facility.  Such  a  penetration  seeks  to  detect  those  who  may  be  en- 


"This  particular  proiert  and  other  aspects  of  the  project's  domestic  activities 
are  treated  in  greater  detail  in  the  Committee's  Staff  Report  on  CHAOS. 


212 

gaged  in  foreign  intelligence  or  sabotage,  and  those  who,  by  lack  of 
security  discipline  or  gross  malfeasance,  may  be  weakening  the  secu- 
rity structure  of  the  facility.  In  essence,  penetrations  are  counterintel- 
ligence against  a  domestic  installation. 

In  one  instance,  an  agent  was  sent  under  the  natural  cover  of  a 
union  construction  man  to  an  Agency  contractor  to  gain  employment 
as  a  pipefitter.^  He  succeeded  in  gaining  access  to  the  target,  and  de- 
veloped information  on  the  installation  and  its  personnel.  Similar 
probes  were  also  conducted  against  other  companies  contracting  with 
the  Federal  Government.  The  proprietaries  which  are  part  of  the  se- 
curity project  have  helped  maintain  the  security  required  by  sensitive 
Agency  operations.  Their  utility,  however,  as  in  the  case  of  nearly  all 
proprietaries  is  relative  to  policy  demands  and  "flap"  potential.  As  one 
Agency  commentator  phrased  it  when  Newsweek  revealed  the  relation- 
ship of  two  Boston  lawyers  with  the  CIA  in  setting  up  proprietaries : 

Proprietaries  have  been  and  will  continue  to  be  an  important 
tool  to  achieve  selected  operational  objectives.  Their  use,  how- 
ever, has  been  drastically  cut  back,  more  because  of  changes 
in  the  international  scene  and  in  operational  priorities,  than 
as  a  result  of  embarrassing  exposures.^ 

As  has  been  the  case  with  nearly  all  other  proprietaries,  not 
everyone  within  the  Agency  has  been  satisfied  with  the  existing  mech- 
anisms of  the  security  project.  There  has  been  constant  review,  criti- 
cism, and  internal  restraint  due  to  a  fear  and  suspicion  that  entities 
which  are  "out  there"  may  not  readily  respond  to  the  leash.  For  exam- 
ple, in  June  of  1964,  the  Chief  of  the  Operational  Support  Division 
wrote  to  the  Deputy  Director  of  Security  (Investigations  and  Oper- 
ational Support)  concerning  project  policy  and  procedures.  In  terms 
of  operational  objectives,  he  noted  that  they  had  "created  an  opera- 
tional support  entity  of  dubious  capability  and  with  ill-defined  ob- 
jectives or  purpose."  He  suggested  that  they  "look  this  ugly  duckling 
in  the  face"  and  see  if  it  could  be  terminated  gracefully  or  "see  if  we 
can  nurture  it  into  a  productive  and  responsible  bird  of  acceptable 
countenance."  ^° 

The  Chief  of  the  Operations  Division  wrote  that  he  "received  the 
definite  impression  that  there  may  be  some  grev  area  with  regard  to  the 
internal  channels  of  command  and  administrative  direction."  He 
noted  that  there  was  confusion  resulting  from  lack  of  a  clear-cut  dis- 
tinction "at  just  what  level  policy  matters  may  be  decided  .  .  .  ,"  Man- 
agement procedures  for  the  project  were  such  that  "under  the  current 

*  He  was,  in  fact,  a  legitimate  tradesman. 

'  Newsweek,  5/19/75,  pp.  25-28. 

"  Memorandum  from  Chief,  Operational  Support  Division  to  Deputy  Director  of 
Security,  6/64. 

In  many  cases  these  concerns  dealt  with  the  inability  of  the  entity  to  provide 
adequate  cover  for  itself  in  order  to  more  adequately  fulfill  its  role.  In  one  in- 
stance, the  physical  backstopping  of  this  project  was  inadequate.  After  this  was 
rectified,  one  official  noted  : 

"It  is  felt  that  this  step  has  strengthened  the  [Corporation's]  cover,  [in  two 
East  coast  cities]  so  that  now  the  company  would  withstand  any  inquiries,  ex- 
cept that  of  an  official  Government  investigation." 


213 

status  everyone  may  take  credit  but  no  one  could  be  blamed."  With 
regard  to  operational  capability  he  noted : 

Quite  candidly,  I  am  somewhat  concerned  about  the  opera- 
tional capability  of  [the]  Project.  It  seems,  as  a  result  of  its 
Topsy-like  growth,  to  be  oriented  toward  the  military  and 
the  building  trades.  Quite  candidly,  it  is  felt  that  the  base 
must  be  broadened.  Further,  I  am  far  from  convinced  that  we 
have  yet  developed  anywhere  near  the  professional  status 
necessary  to  "sell"  this  Project  as  one  having  unique  opera- 
tional capabilities  sufficient  to  justify  its  existence.  In  other 
words,  I  am  not  impressed  with  the  capability  as  it  now  exists 
nor  am  I  sure  that  we  can  sell  this  product  and  then  be  assured 
that  it  can  perform  in  a  satisfactory  manner." 

His  comments  concerning  the  attitude  of  Agency  personnel  were  not 
unique  to  this  proprietary.  They  are  included  here  to  illustrate  the  spe- 
cial problems  posed  by  these  entities.  His  remarks  also  show  the  dan- 
gers inherent  in  some  areas  of  this  activity. 

It  would  seem  that  this  Agency,  particularly  operating  com- 
ponents, are  insistent  upon  pursuing  an  "ostrich  policy"  when 
it  comes  to  their  operational  security  procedures.  I  have  per- 
sonally witnessed  almost  hysterical  reactions  to  criticisms  as 
well  as  total  rejections  of  practical  sugpestions  with  regard  to 
operational  security  procedures.  Now  it  seems  to  me  that  we 
are  going  about  this  in  a  verv  awkward  and  embarrassing 
manner.  WE  ARE,  IN  EFFECT,  ALLOWING  THE 
WRITERS  OF  SENSATIONAL  BOOKS  SUCH  AS 
THE  "INVISIBLE  GOVERNMENT"  TO  PROVIDE 
THE  NECESSARY  INFORMATION  AND  PRES- 
SURE ON  TOP  AGENCY  INIANAGEMENT  TO  COR- 
RECT GLARING  AND  STUPID  COURSES  OF 
ACTION  BEING  PURSUED  AT  THE  WORKING 
LEVEL.  I  have  been  the  object  of  considerable  personal  ridi- 
cule due  to  my  stand  in  opposition  to  the  unrealistic  cover  and 
operational  security  procedures  as  they  relate  to  certain 
aspects  of  [CIA  Operational  Base]  for  example.  IF  we  had 
the  authority  and  capahility  to  have  made  an  objective  probe 
of  this  sensitive  activity  we  may  have  been  able  to  have  sur- 
faced these  obviously  ridiculous  procedures  in  such  a  manner 
that  corrective  action  would  have  been  taken.  Now  is  the  time 
to  present  the  case  in  light  of  the  abiding  fear  of  publicity  cur- 
rently permeating  the  Agency.  I  recommend  that  we  go  after 
the  authority  to  make  independent  (unilateral)  probes  and/or 
probes  requested  and  known  only  at  the  very  highest  levels  of 
the  Agency  with  the  results  discreetly  channeled  where  they 
will  do  the  most  good.  There  necessariW  follows  the  unpleas- 
ant subject  of  money.  As  distasteful  as  it  may  be,  it  is  no  good 
to  have  the  authority  without  a  sufficiently  large  confidential 


214 

fund  set  aside  and  earmarked  for  independently  initiated 

activities.^-  [Emphasis  in  the  original] 
He  emphasized  that  if  the  Agency  did  not  take  the  above  kind  of 
action  to  monitor  its  "image"  at  the  operational  level,  it  would  "con- 
tinue to  be  plagued  with  the  unsolicited  and  uncontrolled  critique 
through  the  newspapers,  periodicals  and  books."  He  critically  con- 
cluded : 

Further,  I  challenge  anyone  to  deny  that  such  exposes  to  date 
are  largely  true  and  usually  the  result  of  our  own  "ostrich 
policy"  and  refusal  to  face  the  fact  that  we  have  operated  in 
some  relatively  amateurish  manners  over  the  years.^^ 

Such  concerns  have  extended  beyond  these  operational  levels  to 
general  issues  of  propriety  and  legality.  As  noted  earlier,  the  so- 
called  "Anti-Pinkerton  Act"  prohibited  the  Office's  continued  con- 
tractual relationship  with  private  companies  or  their  employees  for 
purposes  of  conducting  investigations  or  providing  cover.  The  Gen- 
eral Counsel  responded  as  follows : 

I  am  aware  that  in  fulfilling  the  responsibilities  placed 
upon  your  office  in  support  of  the  Agency's  mission,  many 
investigations  must  be  conducted  without  revealing  Govern- 
ment interest.  Absent  the  relationships  you  question,  you 
could  not  discharge  your  responsibilities.  It  is  this  inability 
to  accomplish  your  tasks  which  causes  recourse  to  the  Agen- 
cy's rather  broad  statutory  authority  to  expend  funds  as 
contained  in  Section  8  of  the  CIA  Act  of  1949,  as  amended. 
This  authority  provides 

(a)  Notwithstanding  any  other  provision  of  law,  sums 
made  available  to  the  Agency  by  appropriation  or  other- 
wise may  be  expended  for  purposes  necessary  to  carry  out  its 
functions,  including — 

(1)  personal  services,  including  personal  services  without 
regard  to  limitations  on  types  of  persons  to  be  employed,  .  .  . 

(b)  The  sums  made  available  to  the  Agency  may  be  ex- 
pended without  regard  to  the  provisions  of  law  and  regu- 
lations relating  to  the  expenditure  of  Government  funds; 
and  for  objects  of  a  confidential,  extraordinary,  or  emer- 
gency nature,  such  expenditures  to  be  accounted  for  solely  on 
the  certificate  of  the  Director  and  every  such  certificate  shall 
be  deemed  a  sufficient  voucher  for  the  amount  therein  certified. 

It  is  my  opinion  that  this  authority  permits  the  Agency  to 
continue  the  two  practices  as  set  out  above  without  fear  of 
violation  of  the  Anti-Pinkerton  Statute."^ 

He  closed,  however,  with  the  following  admonitions : 

There  are,  of  course,  other  dimensions  of  the  question  you 
raise.  As  a  matter  of  policy  I  believe  the  practices  should  be 
reviewed  at  the  highest  levels  within  the  Agency  and,  per- 


"  Ibid. 

"•Memorandum  from  General  Counsel  to  Director  of  Security,  6/64. 


215 

haps,  cleared  with  the  Afrencv's  oversiofht  committees.  In 
addition,  if  one  of  these  rehitionships  became  public,  it  must 
be  recoirnized  that  there  will  be  allegations  that  the  law  has 
been  violated.  On  balance,  it  is  my  view  that  these  considera- 
tions are  not  so  significant  as  to  warrant  a  termination  of  the 
two  practices  with  the  three  companies.  It  is  siigorested,  how- 
ever, that  any  subsequent  projected  association  with  a  detec- 
tive company  or  private  investigative  company  beyond  the 
three  present  companies  be  reviewed  with  this  Office  prior  to 
its  initiation.^* 

The  Insurance  CoTnplex 

This  proprietary  is  a  complex  of  insurance  companies,  most  of 
which  are  located  abroad,  operated  by  the  Agency  to  provide  the  fol- 
lowing services : 

(i)  Handling  of  risks  ostensibly  covered  under  commerci- 
ally issued  policies; 

(ii)  extending  term  life  insurance,  annuities,  trusts  and 
workmen's  compensation  to  Agency  employees  who  are  not 
entitled  to  United  States  Government  benefits; 

(iii)  handling  escrow  accounts  for  agents ;  and, 

(iv)  limited  operational  support  and  investment  activi- 
ties.^^ 

Origin. — Prompted  by  the  Bay  of  Pigs  losses,  the  complex  was 
created  in  1962  to  provide  death  and  disability  benefits  to  agents  and 
beneficiaries  when  security  considerations  preclude  attribution  to  the 
United  States  Government.  Lawrence  Houston,  retired  General  Coun- 
sel of  the  Agency,  testified  that  his  office  established  the  insurance- 
investment  complex,  because  his  staff  Avas  responsible  for  all  problems 
related  to  the  death  or  disability  of  employees  during  the  course  of 
their  Agency  work.  These  problems  were  all  handled  in  what  Houston 
called  a  very  "sketchy  way"  which  he  felt  was  undesirable  from  all 
points  of  view.  Wlien  the  Agency  went  into  air  proprietaries  on  a  large 
scale,  additional  risks  arose  which  simply  could  not  be  underwritten 
commercially. 

So  somewhere  in  the  late  1950s  or  around  1960, 1  think  I  was 
the  one  that  posed  that  we  might  organize  our  own  insurance 
entities.^® 

A  single  event  served  as  the  catalyst  for  the  establishment  of  the 
complex.  Houston  recalled  in  latter  testimony  that 

the  event  that  brought  it  into  focus  was  the  death  of  four 
airmen  in  the  Bay  of  Pigs.  These  men  were  not  supposed 
to  have  engaged  in  the  fighting  and  were  training  on  the 
mainland,  but  when  the  Cubans  were  either  exhausted  or 
unable  to  fly  anymore,  they  pitched  in,  went  over  the  beach, 
and  were  shot  down. 


"/bid. 

^^  Escrow  accounts  are  established  when  an  agent  cannot  receive  his  full  pay- 
ment from  the  CIA  without  attracting  suspicion.  The  funds  not  paid  to  the  agent 
go  into  escrow  accounts  and  are  invested  under  the  complex. 

"  Lawrence  Houston  testimony,  1/15/76,  p.  61. 


216 

We  heard  of  this  for  the  first  time  the  next  morning  and 
Allen  Dulles  called  me  over  and  said,  you'll  have  to  make 
some  provision  for  the  families  of  those  four  fliers  .... 

Through  [an  ad  hoc]  mechanism  we  paid  benefits  to  the 
family  for  a  considerable  length  of  time  until  we  were  able 
to  turn  it  over  to  the  Bureau  of  Employees  Compensation. 

This  was  a  very  makeshift  arrangement,  and  so  based  on 
that  I  came  to  the  conclusion  that  we  needed  a  much  more 
formal  and  flexible  instrument.  And  so  after  long  considera- 
tion within  the  Agency  we  acquired  the  first  two  insurance 
entities  which  had  been  in  being  before  and  then  we  flushed 
them  out  a  little  bit.^^ 

Thus,  the  formation  of  this  entity  represented  the  "culmination  of 
experience"  in  tliis  support  area,  according  to  Houston.  Although 
the  complex  originally  operated  under  the  Domestic  Operations  Divi- 
sion, a  special  board  of  directors  later  assumed  control  of  the  pro- 
prietaries and  their  investments.  In  July  1973  control  of  the  complex 
was  transferred  to  the  Commercial  and  Cover  Staff. 

The  Current  Status. — All  of  the  clients  of  the  project  are  Agency 
employees.^^^  The  complex  was  originally  capitalized  in  1962  with  $4 
million.  Most  of  the  assets  are  held  outside  the  United  States  and  the 
companies  do  not  write  insurance  in  the  United  States.  Each  of  the 
United  States  companies  pays  little  tax  and  is  audited  by  a  proprietary 
firm.  This  method  of  self-insurance  enables  the  Agency  to  funnel  money 
where  needed  in  any  of  its  project  categories.  Currently,  60  percent  of 
the  investments  are  in  long-term  interest  bearing  securities  abroad,  20 
percent  in  off-shore  time  deposits  in  United  States  banks,  and  the  bal- 
ance is  in  common  stocks,  debentures  and  commercial  paper  of  various 
types.  In  the  past  twelve  years  the  sale  of  stocks  has  resulted  in  profits 
in  excess  of  $500,000  accruing  to  the  CIA.  The  combined  total  assets 
of  the  complex  are  in  excess  of  $30  million,  including  its  retained  net 
earnings  of  approximately  $9  million. 

In  1970  the  Inspector  General  examined  the  insurance  complex.  His 
report  raised  questions  about  briefing  congressional  oversight  sub- 
committees which  indicate  that  Congress  had  never  been  informed  of 
the  existence  or  extent  of  the  insurance  complex  w^hich  had  grown  to 
an  organization  with  assets  of  $30  million  without  oversight,  knowl- 
edge, or  approval.  While  annual  audits  of  the  complex  were  conducted, 
there  was  no  annual  allotment  and  no  annual  operational  review 
within  the  CIA,  because  the  insurance  activity  was  no  longer  a  true 
project  after  its  removal  from  the  Domestic  Operations  Division. 

"  Houston.  1/27/76,  p.  8. 

""  The  complex  itself  is  only  for  covert  non-staff  oflScers  of  the  CIA.  In  essence, 
it  only  works  for  what  would  broadly  be  described  as  "agents",  those  not  en- 
titled to  participate  in  the  CIA  retirement  plan  or  in  the  Civil  Service  Retire- 
ment Plan.  They  are  primarily  foreigners,  and  usually  work  for  DDO.  In  the 
case  of  most  agents,  the  CIA  contributes  7  percent  and  the  agent  contributes  7 
percent,  in  keeping  with  CIA  practice  for  regular  employees.  In  cases  where 
the  agent  is  well  along  in  years  and  contributions  from  the  Agency  and  the 
agent  would  not  provide  enough  funds  to  capitalize  an  annuity,  the  Agency  pro- 
vides the  initial  capitalization  ;  however,  such  an  arrangement  must  be  approved 
by  the  DDO. 


217 

Houston  indicated  that  the  complex  had  been  operating  "for  some 
time"  before 

we  told  our  committees  any  detail.  I  think  it  was  men- 
tioned as  a  problem  that  we  had  to  make  arrangements  to 
cope  with  insurance  problems  fairly  early  on.  But  the  fact 
that  it  was  a  business  and  a  business  of  this  substance  was 
not  done  for  some  time.  My  recollection  is  there  was  not  delib- 
erate avoidance;  we  just  didn't  get  to  it.^^ 

With  regard  to  buying  and  selling  securities,  the  Committee  sought 
to  discover  whether  the  CIA  has  any  method  of  preventing  personal 
profit-taking  by  Intelligence  Directorate  analysts  who  have  access  of 
clandestinely  collected  economic  intelligence.  The  CIA  has  indicated 
that  such  an  analyst  would  be  in  the  same  conflict  of  interest  posi- 
tion as  a  staff  member  of  the  Securities  and  Exchange  Commission, 
Department  of  Agriculture,  or  any  other  Government  agency  for  mis- 
use of  confidential  material.  Moreover,  financial  reporting  requirements 
are  imposed  upon  CIA  employees. 

Similarly,  the  Committee  attempted  to  determine  whether  financial 
transactions  were  made  by  the  complex  to  influence  foreign  stock  mar- 
kets or  currencies.  The  1970  review  by  the  Inspector  General  found  no 
evidence  of  such  influence.  Neither  did  the  Committee.  All  witnesses 
and  documentary  evidence  indicated  that  the  complex  was  never  so 
used.  Indeed,  all  agreed  that  the  amounts  involved  in  the  fund  were  in- 
sufficient to  destabilize  any  currency  or  market,  even  if  such  an  effort 
had  been  made. 

The  complex  was  subject  to  an  audit  in  1974  which  concluded  that 
it  "continued  to  be  administered  in  an  efficient  and  effective  manner, 
and  in  compliance  with  applicable  Agency  regulations  and  direc- 
tives." Prior  audit  reports  had  commented  on  the  need  for  a  revised 
administrative  plan.  In  accordance  with  earlier  reports,  the  1974  audit 
noted,  a  "new  plan  was  approved  in  March  1975."  In  addition, 
"minor  administrative  and  financial  problems  surfaced  during 
the  audit  were  discussed  with  [project]  officials  and  resolved."  The 
audit  noted  that  total  income  for  that  year  (from  interest,  premiums, 
gain  or  loss  on  sale  of  securities,  dividends,  rentals,  professional  fees, 
gain  on  foreign  exchange,  gain  on  sale  of  property  and  from  miscel- 
laneous transactions)  was  in  excess  of  $4  million.  The  total  ex'penses 
for  that  year  (allocation  of  premium  income  to  reserve  for  claims, 
interest,  salaries,  rent,  accounting  fees,  taxes,  loss  on  property  write- 
off, legal  aiid  other  fees,  communications,  depreciation  and  amortiza- 
tion, travel,  equipment  rent,  real  estate  expenses,  pensions,  due  and 
subscriptions,  directors  fees,  entertainment  and  miscellaneous)  were 
nearly  $2.5  million.  These  combined  for  a  net  income  in  excess  of 
$1.5  million.19 

The  current  Chief  of  the  Cover  and  Commercial  Staff  has  focused 
on  the  insurance-investment  project  in  a  number  of  interviews  with 
both  the  Rockefeller  Commission  and  the  Committee.  He  has  sug- 
gested that  the  real  question  for  the  complex  is  what  its  role  and  shape 
should  be  after  the  termination  of  many  of  the  Agency's  proprie- 

"'  Houston.  1/15/76.  p.  81. 

"  1974  Audit  of  Insurance  Complex. 


69-983  O  -  76  -  15 


218 

taries.  With  their  liquidation,  he  believes  a  reorganization  and  re- 
definition of  the  insurance-investment  complex  is  needed. 

As  to  the  issue  of  a  safeguard  against  misuse  of  project  funds  or 
"insider"  information  by  the  Agency,  the  Chief  of  CCS  has  told  the 
Committee  that  the  guarantees  against  such  abuse  are  (1)  com- 
partmentation ;  (2)  the  integrity  of  the  Chief  of  CCS;  and  (3)  dis- 
play of  portfolios  to  appropriate  congressional   committees.^" 

Houston  agreed  with  the  three  safeguards  outlined  by  the  CCS 
Chief.  However,  he  added  a  fourth : 

When  we  were  investing  in  stock,  I  would  have  the  list  of 
stock,  the  portfolio,  reviewed  by  our  contract  people,  and  if  I 
found  we  had  any  contract  relationship  with  any  of  the  com- 
panies involved,  we'd  either  refuse  to — ^AVell,  a  couple  of  times 
our  investment  advisor  recommended  a  stock  which  I  knew 
w^e  had  big  contracts  with,  and  I  told  the  board  no,  this  in- 
volves a  conflict  of  interest.  We  won't  touch  it.  And  if  we  had 
anj'thing  from  the  Agency  contract  office  that  indicated  a 
relationship,  we  would  either  sell  the  stock  or  wouldn't  buy 
it.^^ 

Houston  believes  that  the  complex  should  continue  in  some  form 
and  that  the  current  method,  while  not  perfect,  is  the  best  that  can 
be  devised.  The  problem  is  that  the  generation  of  funds  for  these 
companies  must  be  demonstrably  legitimate  and  nongovernmental  if 
beneficiaries  are  to  be  protected;  i.e.,  the  absence  of  investment  by  an 
insurance  corporation  could  well  indicate  to  outsiders  that  its  funding 
is  actually  coming  from  the  Federal  Government. 

Beyond  '"'"Doing  Business''':  Peak  Non-Government  Security 
Investments  hy  Proprietaries  Active  as  of  Dec.  31,  197Jf. — The  insur- 
ance and  pension  complex  has  sizable  investments  in  both  domestic 
and  foreign  securities  markets.  Its  portfolio  runs  the  gamut  of  notes, 
bonds,  debentures,  etc.  But  other  proprietaries  have  also  used  this 
investment  route  as  a  method  of  increasing  capital  and  insuring  ade- 
quate cover. 

For  example,  a  domestic  corporation  purchases  general  merchandise 
in  a  manner  which  cannot  be  traced  to  the  ITnited  States  Government. 
It  provides  covert  procurement  for  the  CIA  Office  of  Logistics. 

"\^niile  this  corporation  has  no  outside  commercial  business  and  only 
five  employees,  as  of  December  31,  1974,  it  had  invested  over  $100,000 
in  time  deposits.  A  second  domestic  corporation  ]Durchases  anus,  am- 
munition, and  police-related  equipment  for  the  Office  of  Ivogistics.  This 
company  has  no  employees  and  is  managed  by  Headquarters  officials 
under  alias.  As  of  December  31,  1974,  this  corporation  had  iuA-ested 
more  than  $30,000  in  a  certificate  of  deposit. 

A  travel  service  proprietary  was  recently  sold  to  an  Agency  em- 
ployee at  the  time  of  his  retirement.  This  employee  had  ostensibly 
owned  the  firm,  but  had  in  fact  managed  it  for  the  Agency.  As  of 


'"  Chief.  CCS.  1/27/76,  pp.  15-16. 

^  Houston.  1/1.V76.  p.  80. 

The  current  charter  for  the  insurance  complex  and  the  administrative  plan 
forhid  further  acquisition  of  U.S.  stocks  and  require  the  divesture  of  American 
equity  investments  in  the  immediate  future. 


219 

December  31,  1974,  this  corporation  had  invested  more  than  $30,000 
in  a  certificate  of  deposit."  An  investment  proprietary,  which  was  later 
dissolved,  had  invested  about  $100,000  in  Mexico  as  of  March  31, 1973. 
A  Delaware  corporation,  which  has  provided  secure  air  support  for 
Agency  employees  and  classified  pouclies  between  Headquarters  and 
other  Agency  facilities  in  the  United  States,  has  nearly  $150,000  in- 
vested in  a  certificate  of  deposit. 

A  former  youth  activity  proprietary,  in  which  the  Agency  no 
longer  retains  an  interest,  had  approximately  $50,000  invested  in  time 
deposits  as  of  March  31,  1972.  Another  proprietary  is  part  of  a  com- 
plex managed  by  the  Cover  and  Commercial  Staff  which  provides 
operational  support  for  foreign  operations.  It  is  a  Delaware  cor- 
poration used  to  collect  proceeds  from  the  sale  of  Agency  pro]:)rietary 
entities  and  to  refund  such  proceeds  to  tl^e  Agency.  Its  total  assets 
were  nearly  three-quarters  of  a  million  dollars  and  its  total  stock- 
holders equity  was  in  excess  of  $15,000  as  of  December  31,  1973.  It 
has  no  emnloyees.  As  of  December  31,  1974,  it  had  invested  almost 
half  a  million  dollars  in  a  convertible  subordinated  debenture  from 
the  sale  of  a  company  and  almost  $50,000  in  notes  receivable. 

Another  company  in  this  complex  is  a  foreign  company  which  has 
been  used  as  an  investment  vehicle  for  funds  earmarked  for  new  com- 
mercial operations  requiring  Agency  investment^.  This  investment 
project  has  been  terminated  and  all  funds  were  returned  to  the  Agency. 
The  company  has  no  employees.  As  of  December  31,  1973,  it  had  in- 
vested nearly  a  quarter  of  a  million  dollars  in  a  Security  Note  of  a 
private  domestic  corporation. 

A  proprietary  which  was  part  of  the  air  support  complex  had  in- 
vested over  $200,000  in  a  certificate  of  deposit  as  of  December  31, 1974. 
This  entity  was  later  sold.  Another  is  part  of  the  management  and 
accounting  complex.  As  of  December  31,  1974,  it  had  nearly  half  a 
million  dollai-s  invested  in  time  deposits. 

The  Air  Proprietaries 

History. — Lawrence  R.  Houston,  fomrer  CIA  General  Counsel, 
was  involved  in  the  establishment  of  the  first  set  of  Agency  proprie- 
taries, and  has  concluded  that  they  should  be  a  mechanism  of  last 
resort.  Houston  maintains  that  the  Agency  learned  this  "the  hard 
way  and  almost  all  of  the  lessons  involved  probably  came  out  one  way 
or  the  other  in  connection  with  a  major  aviation  proprietary  in  the 
Far  East.  Others  had  their  own  special  problems,  but  I  think  the  Air 
America  complex  had  pretty  near  everything."  ^* 

The  Agency  acquired  Air  America  in  1949  ostensibly  to  deny  the 
assets  of  this  company  to  the  Communist  Chirece.  The  CIA  first  ar- 
ranged cash  advances  to  the  company  in  1949.  These  advances  were 
eventually  credited  to  the  Agency's  ]:)urchase  of  the  corporation.  At 
that  time,  Houston  described  the  airline  as  follows : 

This  normal  aviation  organization,  this  would  have  no  mean- 
ing at  all,  was  completely  at  all,  it  would  have  no  standing 


^'  The  Agency  today  uses  this  firm  for  the  purchase  of  airline  tickets  for  travel 
in  support  of  sensitive  projects.  It  is  estimated  hy  the  Agency  that  CTA  business 
represents  about  30  percent  of  the  gross  airline  ticket  sales  of  the  entity  on  an 
annual  basis. 

**  Houston,  1/15/76,  p.  5. 


220 

in  international  law,  aviation  rights,  or  any  of  that.  But  it 
worked  for  what  they  wanted,  which  was  to  take  supplies  up- 
coimtiy  into  inland  China  and  then  to  bring  back  whatever 
cargo  they  could  get  commercially :  tallow,  hides,  bristles,  all 
that  sort  of  trade,  and  then  they  traded  that  off  for  their  own 
account.  And  for  awhile  the  operation  was  fairly  successful, 
the  C-47's  and  C^G's.^^ 

To  finance  this  activity  the  lawyer  for  the  airline  organized  a  com- 
pany. Civil  Air  Transport,  which  was  funded  by  a  Panamanian  cor- 
poration. The  two  owners  of  Air  America  approached  the  Agency  in 
connection  with  a  foreign  operation  in  the  spring  of  1959,  and  in- 
dicated that  unless  they  received  financial  assistance,  the  airline  would 
go  out  of  business. 

A  series  of  meetings  were  held  subsequently  in  which  it  was  deter- 
mined that  the  Agency  needed  to  contract  for  air  transport  in  some  of 
its  operations,  particularly  those  involving  arms  and  ammunition. 

And  so  we  entered  into  an  arrangement,  I  think  in  about  Sep- 
tember of  1949  whereby  we  would  advance  them,  the  figure  of 
$750,000  sticks  in  my  mind,  against  which  we  could  draw  for 
actual  use  of  the  planes  at  an  agreed  on  rate.  .  .  .  And  we  did 
draw  down,  I  think,  all  the  flying  time  and  expended  the 
$750,000  between  September  and  about  January,  at  which 
time  we  suspended  any  further  payments  or  draw-downs. 
I  think  the  money  was  exhausted.^^ 

The  owners  came  to  Washington  in  early  1950  for  a  series  of  discus- 
sions with  the  CIA.  As  a  result  of  these  negotiations,  the  Agency  agreed 
to  advance  more  funds,  and  received  an  option  to  purchase  the  assets 
of  Civil  Air  Transport.  Any  imused  portion  of  the  advances  was  to 
be  credited  toward  the  purchase  price.  Air  America  operated  under 
this  arrangement  until  the  owners  "came  in  in  the  summer  of  1950 
and  said  again  they  were  in  desperate  straits  for  funds."  ^^  An- 
other series  of  meetings  was  held  at  the  Agency  in  which  it  was  con- 
cluded that  the  operations  in  the  Far  East  would  have  a  continuing 
need  for  secure  airlift.  There  was  also  a  general  estimate  that  the  loss 
of  this  airlift  to  the  Chinese  Communists  would  substantially  assist 
them.  Thus  "the  Agency  then  made  the  decision  that  they  would  ex- 
ercise the  option  given  there  was  no  objection  otherwise."  ^* 

The  Agency  felt  that  it  was  necessary  to  obtain  approval  from  the 
Department  of  State,  so  the  head  of  the  CIA's  Office  of  Policy  Coordi- 
nation (who  was  responsible  for  conduct  of  covert  actions)  and  Mr. 
Houston  visited  the  Assistant  Secretary  of  State  for  the  Far  East : 

He  and  I  went  to  see  [the  Assistant  Secretary]  and  explained 
the  situation.  And  [he]  reminded  us  that  it  was  basic  U.S. 
policy  not  to  get  the  government  in  competition  with  U.S. 
private  industry.  But  under  the  particular  circumstances,  in 
particular  as  there  was  really  no  U.S.  private  industry  in- 


===  Ibid.,  p.  6. 
*  Ibid.,  pp.  7-8. 
"Ibid.,  p.  8. 
'^  Ibid.,  p.  9. 


221 

volv'ed  in  the  area,  and  they  agreed  it  was  important  to  deny 
the  assets  to  the  Red  Chinese.  State  would  go  along  on  the 
iniderstanding  that  we  would  divest  ourselves  of  the  private 
enterprise  as  soon  as  such  a  divestment  was  feasible,  and 
all  of  the  circumstances  that  might  obtain.^^ 

The  divestiture  of  these  air  proprietaries  was  not  initiated  until 
1975,  and  some  of  the  entities  have  not  yet  been  fully  divested.  Mr. 
Houston  noted,  however,  that : 

We  did  not  disregard  that  guidance  because  after  very  con- 
siderable use  of  this  asset  during  the  early  '50's,  there  was  a 
question  of  whether  to  continue  it,  and  the  matter  was  taken 
up  in  the  National  Security  Council.  And  Allen  Dulles,  as 
Director,  proposed  that  Ave  continue  the  ownership  and  con- 
trol of  the  assets  of  Air  America,  as  it  then  was  known  includ- 
ing the  subsidy  as  needed.  And  there  was  a  subsidy  at  that 
time.  ...  It  was  about  $1,200,000  per  year.^" 

The  National  Security  Council  considered  whether  this  asset  should 
be  retained  in  1956  and,  on  Dulles'  recommendation,  decided  to  con- 
tinue the  subsidy  to  Air  America. 

The  air  proprietary's  business  consisted  almost  entirely  of  Agency 
cargo  carriage  under  contracts  carrying  military  designations.  The 
company  was  not  organized,  according  to  Houston,  to  fly  common 
carriage  and  had  no  status  in  the  international  air  business.  The  evi- 
dence mdicates  that  during  the  early  1950s,  there  were  two  internal 
struggles:  one  was  where  control  should  lie  in  the  Agency,  and  the 
other  was  what  policies  shoirid  apply  to  the  operation  of  the  company 
itself : 

The  struggle  within  the  Agency  ranged  all  the  way  from 
sort  of  quiet  management  discussions  as  to  what  was  good 
management,  to  sometimes  rather  vociferous  argun^nts  of 
who's  in  charge  here.  And  the  operators  always  said,  "Well, 
we  need  to  call  the  shots  because  it's  our  operation.  .  .  .  And 
this  is  what  we  were  running  into  all  the  time,  of  red  hot 
operators  opposed  to  what  we  would  consider  good  man- 
agement.^^ 

The  air  proprietary  was  managed  by  elements  of  the  Office  of  Policy 
Coordination.  From  the  very  outset  there  were  problems  in  this  man- 
agement structure.  One  such  example  is  the  acquisition  of  Air  Amer- 
ica in  Aup-ust  1950.  Houston  was  participatincr  in  the  negotiations  at 
the  invitation  of  the  Head  of  the  Office  of  Policy  Coordination. 

OPC  was  a  curious  organization,  determined  as  being 
attached  to  the  Agency  for  quarters  and  rationing  with  policy 

=*  Thid.,  pp.  9-10. 

'^  Thid..  p.  10. 

Houston  indicated  that  there  had  hepn  a  subsidy  running  to  the  entities  since 
1949.  ".$1.2  million  represented  about  the  maximum  subsidy  given  until.  I  believe, 
about  19.58  was  the  tumins  point,  and  from  1958  on,  there  was  no  subsidy  as  such 
that  went  into  it."  The  reason  for  that,  of  course,  was  that  the  air  complex  had 
become  "money-making." 

^  IMd.,  pp.  12-13. 


222 

guidance  from  State,  which  was  an  impossible  situation. 
Very  nice  fellows  were  doing  the  negotiating  with 
[OPC]  .  .  .  quite  unknown  to  me,  when  they  made  the  agree- 
ment to  purchase  carrying  out  the  option,  they  gave  the 
vendors  the  right  to  repurchase  at  any  time  within  two  years. 
And  I  thought  this  was  really  inconsistent  with  our  whole 
position.  And  during  the  next  two  years  they  negotiated 
out  that  repurchase  agreement  and  in  its  place  substituted 
an  agreement  to  give  them  a  first  refusal,  if  we  were  to  dispose 
of  the  airline.  That  first  refusal  plagued  us  for  years.  They 
used  to  make  all  sorts  of  extraordinary  claims  under  it  and  it 
was  never  exercised  and  eventually  it  was  sort  of  forgotten 
when  [the  owners]  died.  It  ran  to  them  personally,  whether 
it  ran  to  them  and  two  others  personally,  and  they  all  are  dead 
now.  But  this  shows  a  part  of  the  learning  curve,  which  was 
the  thing  we  were  going  through.^- 

In  the  summer  of  1954,  Houston  and  a  consultant  traveled  to  the  Far 
East  to  observe  the  operation.  The  consultant  went  "specifically  to 
look  at  the  organization  of  the  airline."  At  the  time  of  the  airline's 
purchase,  the  Agency  had  formed  a  Delaware  corporation  to  buy  it. 
The  corporate  counsel  and  the  consultant  were  both  very  concerned 
about  the  technical  organization,  or  lack  of  it,  in  the  operation.  Accord- 
ing to  Houston,  they  demonstrated : 

to  my  satisfaction  that  it  was  an  absolute  situation  and  that 
no  one  out  there  had  the  slightest  understanding  of  the 
problem  or  what  they  were  up  against,  or  wanted  to  do  any- 
thing about  it  [in  terms  of  airline  management]  .^^ 

Following  this  review,  a  new  organization,  designed  to  be  more 
responsive  to  the  Operations  Directorate,  was  created. 

Pacific  Corporation  held  title  to  40  percent  of  the  equity  in  Air 
America,  while  the  remainder  was  ostensibly  owned  by  Chinese,  who 
gave  deeds  of  trust  to  the  Agency  for  their  shares.  For  purposes  of 
international  law  this  overt  arrangement  demonstrated  that  the  com- 
pany was  majority-owned  and  controlled  by  Chinese. 

Air  America  originally  had  several  DC-4's  and  began  modest  opera- 
tions between  Hong  Kong,  Taipei  and  Tokyo.  The  corporation  soon 
acquired  DC-6's,  and  it  was  at  this  time  that  the  question  of  competi- 
tion with  private  corporations  first  arose.  Northwest  Orient  Airlines 
was  then  flying  to  Tokyo,  Seoul,  and  Manila.  A  Northwest  executive 
had  noted  the  Agency's  interest  in  this  area  when  he  was  Chairman  of 
the  Civil  Aeronautics  Board  in  the  late  1.940s  and  early  1950s.  Houston 
told  the  Committee : 

He  became  head  of  Northwest,  a  very  tight  manager,  a  very 
capable  fellow,  and  he  used  to  complain  that  we  were  inter- 
ferring,  we  were  taking  passengers  off  his  airline,  and  we 
would  go  to  him  and  say,  we  have  to  keep  the  airline  in  this 
business  because  the  Chinese  say  they  need  an  international 
airline.  They're  not  ready  to  start  their  own  yet.  And  it  is 


*'7&7(f.,pp  13-14. 
'»/6id.,p.  17. 


223 

necessary  to  its  overall  cover  status  as  a  going  commercial 
concern.^* 

By  1959  the  executive  had  decided  to  ask  the  Civil  Aeronautics 
Board  for  a  decision.  A  meeting  was  held  with  the  entire  Board,  where 
the  executive  maintained  "that  he  was  a  private  industry,  he  should 
not  be  interferred  with  by  government  competition."  ^^  The  Agency 
explained  its  situation,  the  need  for  cover,  and  their  efforts  to  restrict 
carriage  to  the  minimum  necessary  to  retain  their  cover. 

And  it  ended  up  by  one  of  the  members  of  the  Board  turning 
to  [the  executive]  and  saying,  "You  ought  to  be  glad  that 
you  don't  have  a  really  good,  reliable  competitor  in  there." 
He  said,  "If  you  were  being  competed  with  by  private  busi- 
ness, you'd  have  real  headaches.  You  ought  to  be  real  glad 
that  it's  not  worse  than  it  is."  ^^ 

In  these  proceedings,  Houston  conceded  that  some  passengers  were 
traveling  on  CIA  aircraft  rather  than  Northwest  planes,  but  main- 
tained that  the  impact  was  minimal  and  unavoidable.  The  CAB  par- 
ticipated in  discussions  with  both  the  Agency  and  Northwest.  After 
hearing  both  sides,  the  CAB  "came  down  on  the  side  of  the  Agency 
after  making  a  reasoned  judgment."  ^^ 

By  1960  the  airline's  international  commercial  business  was  not  mak- 
ing money.  Maintenance  work  in  Taiwan,  however,  was  "normally  a 
money-maker,  and  this  was  [contracted]  primarily,  although  not 
exclusively,  with  the  U.S.  Air  Force."  ^^ 

There  were  management  problems  in  the  maintenance  operation, 
which  originally  stemmed  from  the  fact  that  field  personnel  were  not 
particularly  astute  in  setting  costs  for  their  contracts.  Houston  cited 
one  instance  when  the  Agency  consultant  replaced  a  corporation  comp- 
troller who  was  very  able,  but  "had  his  own  ideas  of  bookkeeping  and 
controls."  The  consultant  insisted  that  the  corporation  implement 
bookkeeping  practices  and  controls  consistent  with  CAB  and  FAA 
regulations.  The  military  maintenance  contracts  were  constantly 
audited  by  on-site  teams.^'' 

In  the  early  1960s,  the  CIA  received  an  exemption  from  the  Con- 
tract Renegotiation  Board  on  the  grounds  that  renegotiation  personnel 
might  recognize  that  Air  America  was  not  a  commercial  operation 
and  discover  that  the  CIA  was  involved.  The  Agency  went  to  the  head 
of  the  Contract  Renegotiation  Board  with  a  letter  from  the  Depart- 
ment of  Defense  requesting  an  exemption  on  what  it  considered  "per- 
fectly legitimate  grounds."  *°  There  was  indeed  a  basis  for  exemption 
under  the  Renegotiation  Act  as  the  business  was  conducted  entirely 
overseas,  and  the  exemption  was  granted.  The  Agency  was  concerned 
that  it  had  made  a  type  of  profit  (over  40  percent  on  the  Air  Force 
maintenance  contracts),  which  may  well  have  been  the  subject  of  rene- 


"  ma.  p.  21. 
*"  ma.,  p.  22. 

"^  Ibid.  pp.  22-23. 
"  Ibid.,  p.  24. 
"  Ibid.,  p.  25. 
'"  Ibid.,  p.  26. 
*  Ibid. 


224 

gotiation,  had  it  not  been  subject  to  the  exemption.  "So  the  question 
was  what  to  do  about  it.  And  finally,  we  made  a  voluntary  repa3rment 
against  part  of  the  profit  on  that  contract  to  the  Air  Force."  *^ 

As  noted  previously,  the  commercial  airline  aspect  of  the  operation 
operated  mostly  at  a  loss.  While  there  were  periods  when  Air  America 
cargo  carriers  were  very  busy  on  CIA  contracts,  the  Korean  War, 
Diem  Bien  Phu,  and  other  paramilitary  operations;  there  were  also 
periods  between  these  activities  when  there  was  nothing  for  the  air- 
lines to  do.  During  these  periods  of  inactivity,  the  airline  was  still 
saddled  with  expenses  such  as  crews'  salaries  and  the  maintenance  of 
grounded  aircraft.  To  alleviate  this  problem, 

...  we  finally  organized  the  stand-by  contract,  which  was  an 
apparent  military  entity  on  Okinawa.  It  was  our  entity,  but 
it  had  a  military  designation.  I  can't  remember  the  name  for 
it.  And  that  entity  contracted  with  Air  America  for  so  many 
hours  of  cargo  stand-by  to  be  available  any  time  on  call,  and 
that  they  would  pay  so  much  for  that  caDability  being  main- 
tained ...  so  that  is  how  we  kept  the  subsidy  going  to  main- 
tain them  during  periods  when  there  was  not  profitable 
flying.*' 

Another  area  of  concern  was  the  proprietary's  relationship  with  the 
Internal  Revenue  Service.  From  the  outset,  the  company's  manage- 
ment was  informed  that  they  would  be  required  to  pay  appropriate 
taxes.  While  there  were  the  usual  arguments  about  whether  certain 
items  were  appropriate  for  taxation  and  whether  certain  deductions 
should  have  been  granted,  the  relationship  maintained  with  the  IRS 
was  basically  a  normal  one. 

Houston  recalled  that  in  the  mid-1950s  Air  America  received  notice 
of  an  upcoming;  audit  by  the  IRS.  Company  officials  came  to  the 
Agency  and  indicated  that  this  might  pose  a  security  problem.  The 
CIA  went  to  the  Commissioner  of  the  Internal  Revenue  Service  and 
indicated  that  thev  wished  to  have  the  audit  conducted  by  an  IRS 
team  on  an  unwitting  basis  to  see  what  they  could  learn.  "We  thought 
it  would  be  a  good  test  of  the  security  of  our  arrangements."  ^^  Later, 
the  IRS  personnel  would  be  notified  that  thev  had  begun  to  audit  an 
Agency  proprietary,  and  the  audit  would  be  discontinued : 

They  put  a  very  bright  young  fellow  on  and  he  went  into 
it.  Thev  came  up  with  discrepancies  and  things  that  would 
be  settled  in  the  normal  tax  argument,  corporate-IRS  argu- 
ment, and  all  of  these  were  worked  eventually,  and  then  we 
went  to  this  fellow  and  said,  "Now,  this  was  owned  and 
backed  bv  the  CIA,  the  U.S.  Government.  What  was  your 
guess  as  to  what  was  haDpening?" 

And  he  said,  "Well,  I  knew  there  was  somethina:  there,  and 
I  thought,  what  a  wonderful  asset  it  would  be  for  the  Rus- 
sians to  have,  but  I  came  to  the  conclusion  that  it  was  Rocke- 
feller money."  ** 


*^  Thid.,  p.  27. 
*"  lUd.,  p.  29. 
'*Ihid.,  p.  30. 
**  IMd. 


225 

As  the  operations  of  Air  America  developed,  problems  arose  in- 
volving large  cargo  carriers.  In  the  early  days  of  its  operation  the 
airline  used  C-54's,  which  had  an  extremely  limited  range,  but  were 
able  to  perform  under  demanding  circumstances.  Discussions  pro- 
ceeded during  that  period  about  modernizing  the  equipment  and  the 
Agency,  through  Air  America,  bought  DC-6AB's.  These  aircraft  were 
a  conversion  of  the  DC-6  with  large  cargo  doors  installed.  Air 
America  did  not  maintain  any  jet  equipment  at  that  point. 

In  the  early  1950's  Air  America  became  deeply  involved  in  a  mili- 
tary Air  Transport  System.  This  system  was  originally  known  as 
MATS,  and  later  as  MAC. 

They  got  MATS  contracts,  and  Air  America  got  these,  and 
these  were  very  good  to  keep  a  constant  utilization  at  a  good 
rate,  the  MATS  rates  were  usually  good,  because  the  policy 
was  not  to  do  competitive  bidding  for  the  lowest  bidder  be- 
cause then  you  got  the  poorest  service,  but  give  good  rates  to 
the  carriers,  and  then  require  the  carrier  belong  to  the  Civil 
Reserve  Air  Fleet.*^ 

In  1956  MATS  changed  its  policy  and  required  that  bidders  on  their 
contracts  be  certified.  Because  Air  America  could  not  become  certif- 
icated, the  Agency  decided  to  purchase  Southern  Air  Transport. 
While  this  corporation  was  technically  a  separate  entity,  not  involved 
with  Air  America,  it  was  actually  an  integral  part  of  the  complex 
from  a  management  perspective.  All  management  decisions  for  South- 
ern Air  Transport  were  made  by  the  same  CIA  consultant  and  ad- 
visory team  that  established  Air  America  policy. 

Eventually,  MAC  decided  to  require  that  bidders  not  only  be  certif- 
icated, but  that  they  also  have  equipment  qualified  for  the  Civil 
Reserve  Air  Fleet,  i.e.,  jet  aircraft.  As  a  result,  the  Agency  acquired 
Boeino-  727's  and  convinced  Boeing  to  modify  the  727  by  enlarging  the 
ventral  exit,  enhancing  its  airdrop  capability. 

So  the  theory  was  that  the  727's  would  be  used  on  MAC  con- 
tracts to  be  available  on  an  overriding  basis  if  needed  for 
major  national  seciirity  operation.  The^'  were  u-^ed,  usu- 
allv  when  thev  had  spare  time.  To  my  recollection,  they  were 
only  called  off  once,  off  the  actual  contract  time,  and  this  was 
for  a  possible  use  which  didn't  .<ro  through.  But  the  White 
House  asked  if  we  had  the  capabilitv  to  move  something  from 
here  to  there,  I  think  from  the  Philippines  to  somewhere 
in  Southeast  As^a,  I  don't  recall,  and  so  thev  sent  word  to 
manaq-ement  that  thev  wanted  a  plane  available  at  the  earliest 
onnortunitv  at  Clark  Field.  T>«ev  nulled  one  of  them  off  the 
MAC  contract  and  had  it  available.  I  think  readv  to  go,  in 
twelve  hours,  all  set  for  the  ope^^ation.  And  the  operation 
was  never  called.  But  it  showed  wliat  the  canabilitv  was.  And 
what  thev  had  to  do  was  get  substitute  service  for  the  MAC 
contract.*^ 

During  the  late  1960s  several  Chinese  airlines  beoran  operations  on 
a  limited  scale.  With  the  establishment  of  these  indigenous  airlines 


«  ThifT..  3R. 
*"/6i<f.,p.39. 


226 

flying  Far  East  routes,  the  CIA  considered  reducing  its  international 
carriage  work.  The  Agency  decided  to  retain  the  MAC  contracts  be- 
cause they  did  not  compete  with  the  native  enterprises,  but  plans  to 
reduce  Air  America's  international  common  carriage  were  initiated. 

Another  CIA  proprietary.  Civil  Air  Transport  Company,  Ltd., 
which  had  been  organized  in  1954,  had  been  the  first  Agency  entity 
to  engage  in  common  carriage.  Later,  Air  America  did  the  American 
contracting,  followed  by  Southern  Air  Transport  which  also  per- 
formed MAC  and  MATS  contracts  with  planes  leased  from  Air 
America.^'' 

Houston  noted  that  in  the  late  1960s  an  internal  decision  was  made 
that : 

...  we  probably  couldn't  justify  this  major  airlift,  with  the 
big  jets,  and  so  we  started  getting  rid  of  them.  See,  they  had 
no  utilization  to  speak  of  down  in  Southeast  Asia.  A  couple 
of  supply  flights  went  into  [another  area]  and  I  think  we  used 
prop  planes  for  that,  to  my  recollection.*^* 

So  the  Agency  began  to  phase  out  the  727s,  which  contributed  to  the 
decision  to  divest  itself  of  Southern  Air  Transport  and  Air  America. 
Internal  management  was  streamlined  in  1963  by  the  establishment 
of  an  executive  committee  consisting  of  the  boards  of  directors  of  the 
Pacific  Company,  Air  America  and  Air  Asia.  The  overt  board  of 
directors  in  New  York  City  passed  a  resolution  organizing  an  overt 
executive  committee,  which  consisted  of  the  CIA  consultant  and 
two  other  directors.  Covertly,  the  Agency  added  its  own  representa- 
tives to  this  committee,  which  allowed  representatives  of  manage- 
ment. Agency  and  the  operators  to  meet,  consider  policies,  and  give 
guidance  to  the  company.  Houston  indicated  that  this  mechanism 
was  extremely  effective  in  controlling  the  company : 

So  I  think  for  the  last,  oh,  fifteen,  eighteen  years,  the  pro- 
prietary management  system  was  on  the  whole  pretty  effec- 
tive from  the  Agency  point  of  view.  I  think  we  knew  what 
was  going  on.  I  think  we  were  able  to  get  things  up  for  de- 
cisions, and  if  we  couldn't  resolve  them  at  the  staff  level, 
we  would  take  them  up  to  the  Director  for  decisions;  quite 
different  from  the  early  days  in  the  early  50's  that  I  de- 
scribed, and  the  operators  at  least  made  the  claim  that  they 
had  the  right  to  call  the  tune.*^ 

During  this  period  of  time  Operations  Directorate  personnel 

were  getting  themselves  involved  in  the  acquisition  of  air- 
craft and  which  were  getting  awfully  damned  expensive  at 
this  time,  and  separate  projects  were  going  after  some  of  this 
expensive  equipment  without  consideration  of  what  might 
be  available  elsewhere  to  the  Agency  by  contract  or  old  air- 
craft. And  so  the  Director  of  Central  Intelligence  set  up 
EXCOMAIR,  of  which  I  was  Chairman,  and  had  repre- 
sentation from  both  the  operation  and  management  and  fi- 

"  SAT  actually  owned  one  727  and  leased  two  from  Air  America. 
""  Ibid.,  p.  42. 
*^  Ibid.,  pp.  46-47. 


227 

nance  out  of  the  Agency,  to  try  and  coordinate  the  overall 
control  and  acquisition  and  disposition  of  aircraf  t.^^ 

A  February  5, 1963  memorandum  entitled  "Establishment  of  Execu- 
tive Committee  for  Air  Proprietary  Operations,"  noted  that  the  com- 
mittee was  "to  provide  general  policy  guidance  for  the  management  of 
air  proprietary  projects,  and  review  and  final  recommendations  for 
approval  of  air  proprietary  proiect  actions."  Houston  indicated  that 
this  committee,  dubbed  EXCOMAIR,  "was  ...  an  amorphous 
group"  which  worked  on  a  very  informal  basis.  He  indicated  that 
EXCOMAIR  was  an  effective  metliod  of  achieving  overall  coordina- 
tion ;  it  was  responsible  for  conducting  a  thorough  inventory  of  all  the 
equipment  that  the  Agency  had  in  the  aviation  field  and  was  generally 
able  to  keep  track  of  who  needed  what.^° 

According  to  Houston,  a  general  shift  in  thinking  at  the  Agency 
occurred  between  1968  and  1972  as  to  the  desirability  of  maintaining 
a  substantial  airlift  capability.  The  records  appear  to  indicate  that 
Houston  convinced  the  Director  in  the  early  1970s  that  such  a  capacity 
was  no  longer  necessary  to  retain.  Houston  commented  on  this  assess- 
ment as  follows : 

Through  what  knowledge  I  had  of  the  utilization  of  the  vari- 
ous assets,  it  seemed  to  me  that  utilization,  particularly 
of  large  assets,  that  is,  heavy  flight  equipment,  was  going 
down  to  the  point  where  there  was  very  little  of  it.  Con- 
sequently, we  couldn't  forecast  a  specific  requirement.  Such 
requirements  as  you  could  forecast  were  highly  contingent. 
But  I  also  remember  a  couple  of  times  putting  the  caveat  into 
the  Director  that  with  a  changing  world  and  with  the  com- 
plications in  the  aviation  field,  once  you  liquidate  it,  you  could 
not  rebuild,  and  so  you  ought  to  think  very,  very  carefully 
before  getting  rid  of  an  asset  that  did  have  a  contingent 
capability.^^ 

Allegation  of  Drug  TraiflcMng. — Persistent  questions  have  been 
raised  whether  Agency  policy  has  included  using  proprietaries  to 
engage  in  illegal  activities  or  to  make  profits  which  could  be  used  to 
fund  operations.  Most  notably,  these  charges  inchided  allegations  that 
the  CIA  used  air  proprietaries  to  engage  in  drug  trafficking.  The 
Committee  investigated  this  area  to  determine  whether  there  is  any 
evidence  to  snbstantiate  these  charges.  On  the  basis  of  its  examination, 
the  Committee  has  concluded  that  the  CIA  air  proprietaries  did  not 
participate  in  illicit  drug  trafficking. 

As  allegations  of  illegal  drug  trafficking  by  Air  America  personnel 
grew  in  the  spring  and  summer  of  1972,  the  CIA  launched  a  full- 
scale  inquiry.  The  Inspector  General  interviewed  a  score  of  officers  at 
CIA  headquarters  who  had  served  in  Asia  and  were  familiar  with  the 
problems  related  to  drug  trafficking.  After  this  initial  step,  the  Office 
of  the  Inspector  General  dispatched  investigators  to  the  field.  From 
August  24  to  September  10,  1972,  this  group  travelled  the  Far  East 

**  Ihid.,  p.  51. 
"  lUd.,  p.  52. 
°  /Bid.,  p.  57. 


228 

in  search  of  the  facts.  They  first  visited  Hong  Kong,  then  eleven 
Agency  facilities  in  Southeast  Asia.  During  this  period  they  inter- 
viewed more  than  100  representatives  of  the  CIA,  the  Department  of 
State,  the  Agency  for  International  Development,  the  Bureau  of  Nar- 
cotics and  Dangerous  Drugs,  the  U.S.  Customs  Service,  the  Army,  Air 
America,  and  a  cooperating  air  transport  company. 

This  inspection  culminated  in  an  Inspector  General's  report  in  Sep- 
tember 1972,  which  concluded  that  there  was 

no  evidence  that  the  Agency,  or  any  senior  officer  of  the 
Agency,  has  ever  sanctioned  or  supported  drug  trafficking 
as  a  matter  of  policy.  Also,  we  found  not  the  slightest  suspi- 
cion, much  less  evidence,  that  any  Agency  officer,  staff  or 
contract,  has  ever  been  involved  in  the  drug  business.  With 
respect  to  Air  America,  we  found  that  it  has  always 
forbidden,  as  a  matter  of  policy,  the  transportation  of  contra- 
band goods  aboard  its  aircraft.  We  believe  that  its  Security 
Inspection  Service,  which  is  used  by  the  cooperating  air 
transport  company  as  well,  is  now  serving  as  an  added  deter- 
rent to  drug  traffickers.^^ 

But  there  were  aspects  of  the  situation  in  Southeast  Asia  which  were 
cause  for  concern : 

The  one  area  of  our  activities  in  Southeast  Asia  that  gives 
us  some  concern  has  to  do  with  the  agents  and  local  officials 
with  whom  we  are  in  contact  who  have  been  or  may  be  still 
involved  in  one  way  or  another  in  the  drug  business.  We  are 
not  referring  here  to  those  agents  who  are  run  as  penetrations 
of  the  narcotics  industry  for  collection  of  intelligence  on  the 
industry  but,  rather,  to  those  with  whom  we  are  in  touch  in 
our  other  operations.  What  to  do  about  these  people  is  a  par- 
ticularly troublesome  problem,  in  view  of  its  implications 
for  some  of  our  operations,  particularly  in  Laos.^^ 

The  Inspector  General  noted  that  there  was  a  need  for  better  intelli- 
gence not  only  to  support  American  efforts  to  suppress  drug  traffic  in 
Southeast  Asia,  but  also  to  provide  continuing  assurance  that  Agency 
personnel  and  facilities  were  not  involved  in  the  drug  business. 

His  report  began  by  placing  the  allegations  against  the  CIA  in  his- 
torical perspective.  It  allowed  that  when  the  United  States  arrived 
in  Southeast  Asia  "opium  was  as  much  a  part  of  the  agricultural  infra- 
structure of  this  area  as  was  rice,  one  suitable  for  the  hills,  the  other 
for  the  valleys."  ^^ 

The  record  before  the  Inspector  General  clearly  established  that  offi- 
cial United  States  policy  deplored  the  use  of  opium  as  a  narcotic  in 
Southeast  Asia,  but  regarded  it  as  a  problem  for  local  governments. 
It  was  equally  clear  that  Agency  personnel  in  the  area  recognized  its 
dangers  to  U.S.  paramilitary  operations  and  "took  steps  to  discourage 


^''CIA   Inspector  General's  Report,   "Investigation  of  the  Drug  Situation  in 
Southeast  Asia."  9/72,  p.  2. 
^  Ibid.,  pp.  2-3. 
« IMd.,  p.  5. 


229 

its  use  by  indigenous  paramilitary  troops."  ^^  For  example,  Meo  troops 
were  ejected  from  various  camps  when  they  were  caught  using  the 
drug.  But,  the  I.  G.  noted : 

We  did  not,  however,  attempt  to  prevent  its  use  among  the 
civilian  population  in  those  areas  where  we  exercised  military 
control,  believing  that  such  intervention  would  have  been  re- 
sisted by  the  tribals  with  whom  we  were  working  and  might 
have  even  resulted  in  their  refusal  to  cooperate.^® 

Nor  did  the  Agency  interfere  with  the  movement  of  the  opium  from 
the  hills  to  market  in  the  cities  farther  south.  In  this  regard,  the  I.G. 
remarked  candidly : 

The  war  has  clearly  been  our  overriding  priority  in  Southeast 
Asia  and  all  other  issues  have  taken  second  place  in  the  scheme 
of  things.  It  would  be  foolish  to  deny  this,  and  we  see  no 
reason  to  do  so.^^ 

Although  it  maintained  this  posture,  the  CIA  was  reporting  in- 
formation on  opium  trafficking  long  before  any  formal  requrements 
were  levied  upon  it.  As  far  back  as  the  mid-i960s,  when  CIA  case 
officers  began  to  get  a  picture  of  the  opium  traffic  out  of  Burma  as  a 
by-product  of  cross-border  operations,  they  chronicled  this  informa- 
tion in  their  operational  reporting.  As  more  information  came  to  light 
in  Laos  and  Thailand,  this  information  began  to  appear  in  intelligence 
reporting.  Indeed,  the  Agency  "had  substantial  assets  [in  two  South- 
east Asian  countries,  which]  could  be  specifically  directed  against  this 
target  when  it  assmiied  top  priority  in  1971."  ^^ 

Air  America 

As  early  as  1957,  Air  America's  regulations  contained  an  injunction 
against  smuggling.  This  regulation  later  came  to  include  opium.  The 
Report  indicated  that  the  airline's  effort  at  this  time  was  concen- 
trated on  preventing  the  smuggling  of  opium  out  of  Laos  on  its  air- 
craft. Although  still  not  a.  crime  in  Laos,  shipment  of  opium  on 
international  flights  was  clearly  illegal  and  was  grounds  for  dismissal 
of  any  pilot  or  crew  member  involved.  The  Inspector  General  stated 
that:' 

Air  America  has  had  a  few  cases  of  this  kind  (all  of  which 
are  documented  in  the  files  in  the  Agency)  and  has,  in  each 
case,  taken  prompt  and  decisive  action  upon  their  discovery .^^ 

Air  America  was  less  able  to  control  drug  traffic  involving  its  aircraft 
within  Laos.  Although  it  had  a  rule  that  opium  could  not  be  carried 
aboard  its  planes,  the  only  thing  that  could  be  done  if  the  rule  was 
violated  was  to  put  the  opium  and  its  owner  off  at  the  nearest  airstrip. 

^  Ibid.,  p.  6. 

^  Ibid. 

"  Ibid. 

The  report  related  a  statement  of  a  case  oflBeer  which  typified  the  CIA  position 
in  the  matter  during  the  period  1966-1968.  The  oflScer  said  that  he  "was  under 
orders  not  to  get  too  deeply  involved  in  opium  matters  since  his  primary  mission 
was  to  get  on  with  the  war  and  not  risk  souring  relations  with  his  indigenous 
military  counterparts  by  investigation  of  opium  matters." 

"*  Ibid,  p.  7. 

"^Jbid. 


230 

Moreover,  as  a  charter  carrier,  Air  America  did  not  have  full  control 
over  its  traffic.  It  hauled  what  its  customers  put  on  the  aircraft.  Air 
operations  officers,  in  the  case  of  Agency  traffic,  were  responsible  for 
authenticating  the  passengers  and  cargo  they  washed  to  put  on  the 
plane.  In  some  locations,  the  air  operations  officers  had  to  rely  on 
indigenous  assistants  for  much  of  the  actual  details  of  preparing  mani- 
fests, checking  cargo,  and  supervising  the  loading  of  the  aircraft.  In 
areas  where  active  military  operations  were  in  progress,  this  process 
could  become  cursory  if  not  actually  chaotic.  In  such  circumstances,  the 
Inspector  General  concluded  that :  "^ — 

it  was  hardly  fair  to  blame  Air  America  if  opium  happened 
to  get  aboard  its  aircraft.  There  is  no  question  that  it  did  on 
occasion.^" 

With  the  realization  that  drug  abuse  among  American  troops  in 
Vietnam  was  growing  and  that  Southeast  Asian  heroin  was  finding 
its  way  to  U.S.  markets,  the  CIA's  early  attitude  toward  the  opium 
problem  began  to  change.  The  Agency  joined  the  effort  that  began  in 
1971  to  halt  the  flow  of  opium  and  heroin  from  Burma,  Laos,  and 
Thailand,  and  pursued  a  vigorous  intelligence  program  against  these 
targets. 

In  terms  of  staff  and  contract  personnel,  the  Inspector  General  was 
impressed  that  "to  a  man,  our  officers  overseas  find  the  drug  business 
as  distasteful  as  those  at  headquarters."  ^^  Indeed,  many  of  the  CIA's 
officers  were  restive  about  having  to  deal  with  Laotian  officials  who 
were  involved  in  the  drug  business : 

One  young  officer  even  let  his  zeal  get  the  better  of  his  judg- 
ment and  destroyed  a  refinery  in  northwest  Laos  in  1971  be- 
fore the  anti-narcotics  law  was  passed,  thus  risking  being 
charged  with  destruction  of  private  property.''^ 

But,  the  I.G.  reported,  CIA  officers  generally  tolerated  the  opium 
problem,  regarding  it  as  just  another  of  the  frustrations  one  encoun- 
ters in  the  area. 

From  what  the  Inspector  General  contingent  was  able  to  observe  in 
the  field,  "the  pilots  in  the  employ  of  Air  America  and  the  cooperating 
air  transport  company  merit  a  clean  bill  of  health."  ^^  While  it  was 
true  that  narcotics  had  been  found  aboard  some  of  their  aircraft,  in 
almost  every  case  the  small  quantity  involved  could  only  have  been 
for  the  personal  use  of  the  possessor.  The  Inspector  General  felt  that 

Given  the  strict  anti-contraband  regulations  under  which 
these  two  airlines  have  been  operating  for  years,  it  is  highly 
unlikely  that  any  pilot  would  knowingly  have  permitted  nar- 
cotics or  any  other  contraband  aboard  his  aircraft.^* 

Although  they  noted,  "if  it  is  a  truism  to  say  that  they're  in  the 
business  for  the  money,"  the  investigators  concluded  that  these  pilots 

*"  Ibid,  p.  8. 
**  Ibid.  p.  11. 
"  Ibid. 
*"  Ibid.  p.  12. 
^Ibid. 


231 

were  deeply  committed  to  their  job,  and  that  the  subject  of  dnisfs  was 
as  much  an  anathema  to  them  as  it  is  "to  any  decent,  respectable  citi- 
zen in  the  United  States."  ^^ 

The  Inspector  General  indicated  how  one  pilot  felt  about  the  sub- 
ject. He  stated : 

You  ofet  me  a  contract  to  defoliate  the  poppy  fields  in  Burma, 
and  I'll  take  off  ri^ht  now  and  destroy  them.  I  have  a  friend 
whose  son  is  hooked  on  dru^s,  and  I  too  have  teenage  chil- 
dren. It  scares  the  hell  out  of  me  as  much  as  it  does  you  and 
the  rest  of  the  people  in  the  States.^^ 

The  report  also  established  that  the  pilots  were  well  paid,  averaging 
close  to  $45,000  a  year.  Almost  half  of  their  salaiy  was  tax-free.  In 
this  context  the  I.G.  concluded  that 

Although  the  temptation  for  big  money  offered  by  drugs  can- 
not be  dismissed  out  of  hand,  it  helps  to  know  that  the  pilots 
are  making  good  money.  Further,  an  American  living  in 
Vientiane  can  bank  a  substantial  part  of  his  salary  without 
much  difficulty,  and  a  common  topic  of  conversation  among 
pilots  is  how  and  where  to  invest  their  fairly  substantial 
savings.^^ 

The  milieu  in  w'hicJh  these  pilots  found  themselves  did  serve  to  evoke 
images  of  them  as  mercenaries  or  soldiers  of  fortune.  The  Inspector 
General  indicated  that  a  "number  of  them  do  like  their  wine  and 
women,  but  on  the  job  they  are  all  business  and  very  much  like  the 
average  American."  ^^ 

The  investigators,  however,  could  not  be  as  sanguine  about  the 
behavior  of  the  numerous  other  individuals  who  worked  for  Air 
America  and  the  cooperating  air  transport  company  as  mechanics  or 
baggage  handlers.  The  nature  of  their  work  allowed  these  employees 
easy  access  to  the  airplanes,  and  created  real  opportunities  for  con- 
cealing packages  of  narcotics  in  the  airframes.  The  records  indicated 
that  there  were  several  instances  where  employees  had  been  fired  be- 
cause they  were  suspected  of  handling  drugs.  The  Inspector  General 
advisd  that : 

Despite  the  introduction  of  tighter  security  measures,  it 
would  be  foolish  to  assume  that  there  will  not  be  any  further 
attempts  by  mechanics  and  baggage  handlers  to  conceal  nar- 
cotics on  airplanes.^^ 

In  a  startling  revelation  concerning  indigenous  officials  in  Southeast 
Asia,  the  I.G.  bitterly  reported  that 

In  recent  testimony  to  Agency  officers  in  Vientiane,  Laotian 
officials  who  had  been  involved  in  the  drug  business  stated 
that  there  was  no  need  for  drug  traffickers  to  use  Air  Amer- 
ica facilities  because  they  had  their  own.  We  certainly  found 

*  Ihid. 

*  lUd.  p.  13. 
"  lUd. 

"  lUd.  p.  14. 
"  lUd. 


232 

this  to  be  true.  In  addition  to  the  Royal  Lao  Air  Force 
(RLAF),  there  are  several  commercial  airlines  in  Laos,  in- 
cluding Royal  Air  Lines,  Lao  Air  Development,  Air  Laos, 
and  perhaps  others,  all  of  which  evidently  have  ties  with 
high  Laotian  government  officials.  It  is  highly  problematical 
whether  these  airlines  have  a  full  platter  of  legitimate  busi- 
ness.^° 

Another  factor  which  had  the  effect  of  making  Air  America  a  less 
desirable  target  for  the  drug  trafficker  was  that  there  were  virtually 
no  regular,  pre-arranged  flight  schedules  for  the  pilots.  Ordinarily, 
the  pilot  did  not  know  until  he  reported  for  duty  which  airplane  he 
would  be  flying  or  what  his  flight  schedule  would  be  for  the  day. 

Air  America's  Security  Inspection  Service,  which  was  established 
early  in  1972,  also  had  five  inspection  units  in  Laos.  Similar  units 
were  eventually  established  elsewhere  in  Southeast  Asia.  Each  unit 
consisted  of  an  American  chief  and  three  or  four  indigenous  personel. 
The  basrgage  of  the  pilot  and  all  passengers  traveling  in  CIA-owned 
aircraft  was  inspected  in  the  presence  of  an  American  official  before 
anyone  was  permitted  to  board.  All  cargo  was  inspected  unless  it  had 
been  exempted  under  established  procedures.  The  very  existence  of 
the  system  was  considered  a  deterrent  to  drug  smuggling  on  Air 
America  aircraft  and  did  result  in  several  discoveries  of  drugs  among 
the  baggage  of  passengers,  although  only  one  or  two  of  these  involved 
quantities  of  sufficient  size  to  be  as  commercial. 

Agents  and  Assets 

This  is  one  area  where  the  CIA  is  particularly  vulnerable  to  criti- 
cism. Relationships  with  indigenous  assets  and  contacts  are  always 
broad.  In  Laos,  clandestine  relationships  were  maintained  in  every 
aspect  of  the  Agency's  operational  program — whether  paramilitary, 
political  action,  or  intelligence  collection.  These  relationships  included 
people  who  either  were  known  to  be,  or  were  suspected  of  being,  in- 
volved in  narcotics  trafficking.  Although  these  individuals  were  of  con- 
siderable importance  to  the  Agency,  it  had  doubts  in  some  instances. 
For  example,  the  investigators  were  troubled  by  a  foreign  official  who 
was  alleflfed  to  have  been  involved  in  one  instance  of  transporting 
opium.  He  was  evidently  considered  "worth  the  damage  that  his  ex- 
posure as  an  Agency  asset  would  bring,  although  the  Station  insists 
(a)  that  he  is  of  value  to  the  Station  as  an  asrent  of  influence  [deleted] 
and  (b)  that  his  complicity  in  the  [deleted]  incident  has  never  been 
proved."  " 

Among  liaason  contacts,  which  in  the  military  arena  included  vir- 
tually every  high-ranking  Laotian  officer,  the  Inspector  General 
warned  that  the  Agency  was  "in  a  particular  dilemma." 

The  past  involvement  of  many  of  these  officers  in  drugs  is 
well-known,  and  the  continued  participation  of  many  is  sus- 
pected; yet  their  goodwill,  if  not  actual  cooperation,  con- 
siderably facilitates  the  military  activities  of  the  Agency- 
supported  irregulars.^2 

■"  lUd. 

"  lUd,  p.  18. 


233 

The  Inspector  General  concluded,  that 

The  fact  remains  .  .  .  that  our  continued  support  to  these  peo- 
ple can  be  construed  by  them,  and  by  others  who  might  become 
aware  of  the  association,  as  evidence  that  the  Agency  is  not  as 
concerned  about  the  drug  problem  as  other  elements  of  the 
U.S.  mission  in  Laos.  The  Station  has  recently  submitted,  at 
headquarters'  request,  an  assessment  of  the  possible  adverse 
repercussions  for  the  Agency,  if  its  relationship  to  certain  as- 
sets were  exposed.  We  think  that,  on  the  whole,  that  assess- 
ment was  unduly  sanguine.  We  believe  the  Station  should 
take  a  new  look  at  this  problem,  using  somewhat  more  strin- 
gent criteria  in  assesshig  the  cost-benefit  ratio  of  these  rela- 
tionships. We  realize  that  it  is  impossible  to  lay  down  any  but 
the  most  general  kind  of  rules  in  judging  whether  to  con- 
tinue, or  to  initiate,  a  clandestine  relationship  with  Laotians. 
Each  case  has  to  be  decided  on  its  own  merits,  but  within  a 
framework  that  attaches  appropriate  importance  to  its  pos- 
sible effect  on  the  U.S.  Government's  anti-narcotics  efforts  in 
Laos.  It  is  possible  that  the  Station  will  need  additional 
guidance  from  headquarters  as  to  current  priorities  among 
our  objectives  in  Laos.^^ 

2.  Nonoperating  Proprietaries 

Nonoperating  proprietaries  vary  in  complexity  according  to  their 
Agency  task.  They  are  generally  corporate  shells  which  facilitate  for- 
eign operations  and  clearly  pose  no  competitive  threat  to  legitimate 
businesses.  The  most  elaborate  are  legally  licensed  and  established  to 
conduct  bona  fide  business. 

All  nonoperating  proprietaries  do  have  nominee  stockholders, 
directors,  and  officers  and  are  generally  directed  by  one  of  the  Agency's 
proprietary  management  companies.  The  company  address  may  be  a 
Post  Office  box,  a  legitimate  address  provided  by  a  cleared  and  witting 
company  official  or  private  individual  or  the  address  of  a  proprietary 
management  company.  The  nonoperating  proprietaries  maintain  bank 
accounts,  generate  business  correspondence,  keep  books  of  account 
which  can  withstand  commercial  and  tax  audit,  file  State  and  Federal 
tax  returns,  and  perform  normal  business  reporting  to  regulatory 
authorities.  They  are  moderately  capitalized,  generally  at  around 
$5,000,  and  their  net  worth  at  any  one  time  varies  according  to  the 
Agency  task  they  are  performing.  As  of  December  31, 1973,  more  than 
60  percent  of  the  combined  net  worth  of  these  proprietaries  was  operat- 
ing capital  for  companies  which  provide  cover  to  agency  personnel. 

Legally  incorporated  companies  require  less  elaborate  commercial 
administration  due  to  the  nature  of  the  tasks  they  perform  for  the 
CIA.  This  kind  of  proprietary  is  directly  managed  by  headquarters 
specialists  operating  in  alias.  No  commercial  book  or  accounts  are  kept, 
and  in  the  event  of  a  tax  audit  the  Agency  has  to  brief  the  auditing  au- 
thority. 

Depending  on  use,  administration  may  be  as  simple  as  maintain- 
ing bank  accounts  and  filing  annual  franchise  taxes,  or  as  extensive 

■"  Ibid,  p.  19. 


69-983  O  -  76  -  16 


234 

as  that  required  to  obtain  Employee  Identification  numbers,  to  pay 
personnel  taxes,  and  to  file  tax  returns. 

There  are  also  sole-proprietorships^  which  are  proprietaries  in  the 
sense  of  bein^  Agency-owned  and  administered.  The  Agency  estab- 
lishes and  registers  these  sole-proprietorships.  Arrangements  are  made 
to  provide  an  address  for  these  entities.  Like  the  proprietary  corpora- 
tions administered  by  Agency  Headquarters  specialists,  these  com- 
panies provide  cover,  salaries,  and  tax  attribution  for  Agency 
personnel. 

Another  type  of  entity  used  by  the  Agency  is  a  proprietary  only 
in  the  sense  of  being  Agency-owned  and  administered.  These  are 
the  notional  companies  which  are  not  legally  registered,  but  have 
names  and  bank  accounts  controlled  by  the  Agency.  The  Agency 
arranges  domiciliary  addresses  and  any  queries  are  referred  to  the 
Agency  specialists  concerned.  These  notional  entities  are  used  to  pro- 
vide status  and  operational  cover  for  Agency  personnel  involved  in 
all  types  of  high-risk  intelligence  operations. 

C.  Operation  or  Proprietaries 

7.  Statutory  Authority 

The  Agency's  statutory  authority  to  spend  money  for  proprietary 
corporations  in  support  of  Agencv  operations  is  derived  from  Section 
8(b)  of  the  CIA  Act  of  1949.  This  act  states: 

The  sums  made  available  to  the  Agency  may  be  expended 
without  regard  to  the  provisions  of  law  and  regulations  relat- 
ing to  the  expenditure  of  Government  funds;  and  for  objects 
of  a  confidential,  extraordinary,  or  emergency  nature,  such 
expenditures  to  be  accounted  for  solely  on  the  certificate  of 
the  Director  and  every  such  certificate  shall  be  deemed  a  suf- 
ficient voucher  for  the  amount  therein  certified.^^ 

The  language  contained  in  Section  8(b)  is  adequate  authority  to 
exclude  the  operation  of  these  proprietary  corporations  from  the  law 
governing  Government  corporations  in  31  U.S.C.  841  et  seq.  How- 
ever, the  CIA  General  Counsel  ruled  in  1958  that  the  CIA  should 
comply  with  the  principles  in  that  act  to  the  extent  possible,  and  this 
has  been  done.  A  classified  Memorandum  of  Law  by  the  CIA  General 
Counsel  on  the  Agency's  authority  to  acquire  and  dispose  of  a 
proprietary  without  regard  to  provisions  of  the  Federal  Property 
and  Administrative  Services  Act,  outlines  the  CIA's  position.  This 
position  was  upheld  by  the  U.S.  District  Court  in  the  Southern 
District  of  Florida  in  dismissing  the  suit  Fanner  v.  Southern  Air 
Transport  on  July  17,  1974.^^  That  result  was  not  appealed  and 
remains  the  law. 

2.  Specific  Controls 

The  formation  and  activities  of  proprietaries  are  controlled  through 
various  mechanisms  to  assure  their  proper  use.  These  include  internal 

'*  50  use  403(b). 
''  See  p.  246. 


235 

Agency  regulations  which  establish  the  administrative  procedures  to 
be  followed  in  the  formation,  operation,  and  liquidation  of  proprietar- 
ies. An  Administrative  Plan  (specifying  the  operational  purpose,  ad- 
ministrative and  management  procedures,  and  cost)  and  a  Liquidation 
Plan  (specifying  details  of  liquidation  and  disposition  of  funds  when 
liquidation  is  contemplated)  must  be  coordinated  among  the  effected 
CIA  components  and  approved  at  appropriate  management  levels. 
This  regulatory  control  along  with  policy  memoranda  are  intended  to 
assure  proper  conduct  by  proprietaries.  Each  Agency  component  in- 
volved in  the  operation  of  a  proprietary  enterprise  is  responsible  for 
compliance.  The  Chief  of  the  Cover  and  Commercial  Staff,  the  Direc- 
tor of  Finance,  and  the  Comptroller  are  assigned  particular  responsi- 
bilities. 

The  controls  and  procedures  applicable  to  each  operating  pro- 
prietary specify  that  a  project  outline  and  an  administrative  plan  must 
be  approved  at  the  Deputy  Director  level.  Routine  control  and  admin- 
istration is  executed  by  a  project  officer  at  Headquarters.  The  Agency 
conducts  semi-annual  reviews  to  determine  whether  operational  needs 
still  exist,  and  performs  regular  audits  to  assure  proper  management 
and  financial  accountability.  Proprietaries  are  liquidated  as  their  use- 
fulness ends  and  new  ones  are  formed  as  needed. 

3.  Treaf7nent  of  Profits 

The  CIA  General  Counsel  ruled  in  January  1958  that  "income  of 
proprietaries,  including  profits,  need  not  be  considered  miscellaneous 
receipts  to  be  covered  into  the  Treasury  but  may  be  used  for  proper 
corporate  or  company  purposes."  ^®  This  subject  was  reviewed  and  the 
opinion  reaffirmed  by  the  General  Counsel  in  July  1965.  The  policy  of 
retaining  profits  has  continued,  although  onlv  a  very  few  Agency  pro- 
prietaries have  ever  been  profitable.  The  CIA's  legal  basis  for  retaining 
profits  for  the  use  of  the  operating  corporate  entities  is  discussed  below. 

Section  104  of  the  Government  Corporations  Control  Act  provides 
that  Congress  shall  enact  legislation  necessary  to  make  funds  or  other 
financial  resources  available  for  expenditure  and  limit  the  use  thereof 
as  the  Congress  may  determine.  It  is  further  provided  that  "this  sec- 
tion shall  not  be  construed  as  preventing  the  Government  corporations 
from  carrying  out  and  financing  their  activities  as  authorized  by 
existing  law  .  .  ."  ^^  The  legislative  history  explaining  this  section 
of  the  act  states  that  "in  cases  where  no  other  law  required  a  congres- 
sional authorization  of  expenditures,  the  corporation,  if  it  had  means 
of  financing  other  than  annual  appropriations,  could  continue  to  oper- 
ate in  the  absence  of  any  action  by  Congress  on  its  budget  program."  '^^ 
The  statute  creating  a  particular  Government  corporation  may  provide 
specifically  how  that  corporation  may  use  its  profits  in  the  conduct  of 
its  business. 

The  Government  Corporations  Control  Act  clearly  did  not  contem- 
plate Government  corporations  of  the  type  that  the  CIA  has  estab- 
lished. Furthermore,  it  is  not  feasible  for  Agency  proprietaries  to  be 
created  by  act  of  Congress  or  overseen  precisely  as  provided  for  normal 

"  CIA  General  Counsel  Memorandum  of  Law,  1/6/58. 

"31  U.S.C.  8^9. 

^^  Senate  Banking  and  Currency  Committee  Report  694, 11/2/45. 


236 

Grovernment  corporations  in  the  Act.  Nevertheless,  the  Agency  has 
felt  that  the  appropriate  and  reasonable  policy  would  be  to  treat  and 
control  proprietaries  in  accordance  with  the  terms  of  the  law.  The 
Agency  maintains  that  there  is  no  need  to  have  more  restrictive  rules 
applied  to  its  corporations  in  the  use  of  funds,  including  profits,  than 
are  applied  to  government  corporations  under  existing  statute.  Thus, 
the  Agency  considers  the  use  'by  a  proprietary  of  its  earnings  to  carry 
on  its  corporate  affairs  without  an  offset  against  Agency  appropria- 
tions to  be  a  legitimate  practice  which  does  not  constitute  an  illegal 
augmentation  of  appropriations. 

With  rare  exception,  operating  proprietaries  have  not  been  self- 
sustaining  from  real  income.  Income,  including  profits,  is  retained  by 
the  proprietaries  consistent  with  the  usual  operating  practices  of  busi- 
ness enterprises. 

The  use  of  proprietaries'  profits  is  controlled  by  annual  CIA  reviews 
and  audits  of  the  total  capital,  investment  and  profits  situations  in  the 
context  of  operational  objectives  and  cover  needs  of  the  corporations. 
The  CIA  maintains  that,  in  effect,  the  annual  project  review  is  based 
upon  an  audit  as  searching  as  that  required  for  statutory  government 
corporations.  While  this  may  be  technically  true,  such  audits  do  not 
raise  broad  questions  of  program  duration  and  effectiveness. 
There  is  no  broad  management  audit  in  program  terms,  but  rather  only 
a  financial  audit  to  determine  essential  security  and  integrity.  More- 
over, there  have  been  no  outside  audits  of  any  kind,  especially  those  to 
determine  performance  and  effectiveness.  One  former  CIA  employee 
intimately  involved  with  this  process  suggested  strongly  that  these 
provisions  were  inadequate.  This  needs  to  be  rectified,  and  the  Commit- 
tee recommends  that  such  audits  be  reported  to  the  new  legislative  over- 
sight committee.'* 

4.  Disposition  of  Funds 

Any  proprietary  with  funds  in  excess  of  its  current  or  foreseeable 
needs  is  required  to  return  such  funds  to  the  Agency.  Funds  generated 
by  the  liquidation  or  termination  of  a  proprietary  are  returned  to  the 
Agency,  except  in  a  limited  number  of  situations  when  they  are  trans- 
ferred to  another  proprietarv  for  "similar  use."  On  the  basis  of  a  CIA 
General  Counsel  opinion  of  February  3, 1975,  the  Agency  has  revised 
its  policy  on  the  treatment  of  all  returns  of  funds  from  proprietaries. 
All  such  returns  are  to  be  remitted  to  the  United  States  Treasury  as 
"Miscellaneous  Receipts."  Prior  to  this  change  in  policy,  returns  were 
treated  as  refunds  of  the  previously  recorded  expenses,  up  to  the 
amount  of  such  expense  for  a  particular  proprietary  with  any  excess 
amounts  returned  to  the  Treasury  as  "Miscellaneous  Receipts."  ®° 

D.  The  Disposal  of  Proprietaries 
1.  Overview 

The  Agency  has  emphasized  the  degree  to  which  the  extensive  pro- 
prietary system  it  has  maintained  in  the  past  has  been  disposed  of  in 
recent  years.  According  to  the  current  Chief  of  the  Cover  and  Com- 

■"  See  Recommendation  50. 
^  See  Recommendation  52. 


237 

mercial  Staff,  at  least  as  far  as  large  proprietaries  are  concerned, 
"because  of  multitudinous  reasons  they  will  be  viewed  as  the  solution 
of  last  resort.^^  Size  was  a  problem  and  made  it  "inevitable  that  cover 
Vv'ould  not  last."  Moreover,  there  simply  is  not  a  need,  according  to  the 
Agency,  for  the  kind  of  capabilities  supplied  by  an  Air  America  either 
now  or  in  the  foreseeable  future.  In  this  regard,  the  Agency  has  also 
indicated  that  no  "real  proprietaries"  are  in  planning  because  there 
are  no  such  operational  i-equirements  before  the  Cover  and  Commer- 
cial Staff. 

The  Committee  has  learned  from  its  study  that  the  Agency  retains 
the  capability  "in  being"  to  create  large  proprietaries.*^  More- 
over, numerous  "shelf"  corporations  are  kept  available  to  provide 
cover.  These  entities  are  generally  of  the  notional  variety  which  do 
not  compete  with  legitimate  enterprises.  Nonetheless,  the  Agency  has 
emphasized  the  need  to  maintain  this  general  vehicle  for  at  least  one 
purpose :  to  retain  assets.  Notionals  are  a  very  effective  cover  mecha- 
nism when  they  are  small,  and  can  be  very  effective  in  securely  pro- 
viding various  support  items.  In  addition,  the  Chief  of  the  Cover  and 
Commercial  Staff  told  the  Committee  that,  in  order  to  carry  out  opera- 
tional functions,  the  CIA  needs  a  variety  of  tools : 

We  need  a  variety  of  mechanisms.  We  need  a  variety  of 
cooperating  personnel  and  organizations  in  the  private 
sector. 

Proprietaries,  in  the  largest  sense  as  we  have  used  it 
throughout  these  investigations,  are  part  of  this  arsenal  of 
tools  that  the  Agency  must  have  in  order  to  fulfill  its  job. 
I  said  earlier  on  this  morning  that  on  the  basis  of  our  ex- 
perience with  proprietaries  we  have  come  to  the  conclusion 
that  wherever  possible  w^e  try  to  use  other  means  of  pro- 
viding cover  and  hiding  the  CIA  hand  than  proprietaries. 
But  where  there  is  no  other  way,  or  where  it  is  the  best  way 
in  order  to  achieve  the  operational  objective,  we  have  used 
proprietaries  in  the  past  and  we  propose  to  continue  to  use 
proprietaries.  So  we  are  not  getting  out  of  the  proprietary 

^'  Chief,  CCS,  1/27/76,  np.  15-16. 

The  Deputy  Director  of  Operations  noted  recently  in  testimony  : 

"I  think  by  and  large  that  the  day  of  the  big  proprietary  is  over.  We  have 
attempted  over  the  past  few  years  to  try  to  squeeze  down  on"  those  kinds  of  pro- 
prietaries and  I  think  we  have  really  gone  now  to  a  fairly  small  number,  and 
a  fairly  tightly  controlled  group  of  proprietaries  who  are  doing  legitimate  opera- 
tional jobs,  particularly  in  the  media  field. 

"Our  experience  with  proprietaries  in  the  past  has  been  if  left  by  themselves, 
they  tend  to  absorb  larger  and  larger  amounts  of  government  money  and  are  not 
particularly  for  a  business.  They  are  not  very  viable  in  the  business  sense  and 
quickly  become  suspect  as  not  having  any  commercial  validity.  And  we  have, 
I  think  in  the  past  ten  years,  we  have  in  this  past  ten  years  gotten  rid  of  an 
enormous  number  of  proprietaries  in  this  field.  I  don't  foresee  us  getting  in  the 
immediate  future  into  any  expansion  of  that  proprietary  record.  I  think  we  are 
about  right  in  terms  of  where  we  are  now." 

^  The  DDO  clospd  hi<!  recent  testimony  with  a  caveat : 

"I  can  visualize,  however,  depending  on  what  happens  to  the  Agency  in  the 
future,  the  po.ssibility  that  we  might  want  to  use  more  proprietaries,  par- 
ticularly in  the  field  of  cover  if  this  gets  terribly  tight  or  terribly  diflicult.  But 
the  average  operational  purpose,  except  for  some  of  these  media  operations,  all 
we  need  is  cover  and  I  think  that  most  of  the  proprietaries  that  we  have  fall 
into  that  category." 


238 

business  as  such.  But  it  is  true  that  the  proprietaries  that 
we  are  using  at  the  present  time  and  what  I  can  foresee  for 
the  immediate  future  is  going  to  be  of  a  smallish  variety,*^ 

The  former  General  Counsel  of  the  CIA,  Lawrence  K.  Houston,  con- 
curred in  this  judgment.  It  should,  he  said,  be  used  only  as  a  "last 
resort."  ^*  The  Chief  of  CCS  noted  that  these  operations  are  run  for 
specific  purposes  unrelated  to  profit  and  that,  "I  am  not  in  the  business 
to  make  money."  ®^ 

Only  two  proprietaries,  the  insurance  complex  and  Air  America, 
returned  continuing  profits  or  did  large  volumes  of  business.  For 
this  reason,  the  Committee  sought  to  discover  if  the  CIA  would  ever 
again  seek  to  establish  a  large  proprietary  conglomerate  such  as  the 
Air  America  complex.  The  Chief,  CCS  responded  in  this  manner : 

These  kind  of  facilities,  any  kind  of  facilities  of  this 
kind  get  established  and  are  used  because  they  are  needed  in 
the  pursuit  of  an  existing  operational  requirement. 

If  such  an  operational  requirement  should  again  arise,  I 
would  assume  that  the  Agency  would  consider  setting  up  a 
large-scale  air  proprietary  with  one  proviso — that  we  have  a 
chance  at  keeping  it  secret  that  it  is  CIA.^ 

Mr.  Houston  noted  that  he  did  not  believe  it  was  possible  to  keep  such 
an  activity  secret : 

I'll  answer  to  that.  I  don't  believe  it's  possible.  The  avia- 
tion industry,  everybody  knows  what  everybody  is  doing  and 
something  new  coming  along  is  immediately  the  focus  of 
thousands  of  eyes  and  prying  questions,  and  that  combined 
with  the  intricacies  of  a  corporate  administration  these  days, 
and  the  checks  and  balances,  I  think  make  a  large  aviation 
proprietary  probably  impossible ....  I  don't  think  you  can  do 
a  real  cover  operation,  is  my  personal  assessment.®^ 

The  Committee  reviewed  those  proprietaries  which  had  been  sold 
or  otherwise  disposed  of  during  the  period  from  1965  to  1975.  It  sought 
to  discover  which  of  those  proprietaries  disposed  of  in  the  last  ten 
years  maintained  a  significant  relationship  with  the  Agency  by  con- 
tract or  informal  understanding.  More  specifically,  the  Committee 
sought  answers  to  the  following  questions : 

(1)  How  have  proprietaries  been  disposed  of  by  the 
Agency  ? 

(2)  Have  proprietaries  or  their  assets  been  sold  to  per- 
sons who  had  previously  served  as  directors,  officers  or  em- 
ployees of  the  proprietaries  ? 

(3)  How  often  were  proprietaries  sold  pursuant  to  an 
agreement  or  understanding  that  the  purchased  proprietary 
would  provide  the  Agency  with  goods,  services  or  other 
assistance  ? 


«^  Chief,  CCS,  1/27/76,  pp.  1^20. 

^  Houston,  1/15/76,  p.  5. 

*  Chief,  CCS,  1/27/76,  p.  80. 

^  Ibid.,  p.  21. 

"  Houston,  1/27/76,  p.  21. 


239 

Our  study  revealed  that  during  the  mdicated  period,  a  large  num- 
ber- of  proprietaries  were  dissolved,  sold,  or  otherwise  disposed  of, 
thus  substantiating  the  Agency's  claim  that  it  had  moved  decisively  to 
extricate  itself  from  this  area  of  activity.  In  a  very  real  sense,  it  is 
nearly  impossible  to  evaluate  w^hether  a  ''link"  still  exists  between  the 
Agency  and  a  former  asset  related  to  a  proprietaiy.  In  some  cases, 
even  though  formal  and  informal  Agency  ties  are  discontinued,  social 
and  interpersonal  relationships  remain.  The  impact  of  such  liaisons  is 
difficult  to  assess. 

At  its  peak,  Air  America,  the  Agency's  largest  proprietary,  had 
total  assets  of  some  $50  million  and  directly  employed  more  than  5,600 
individuals  (the  total  number  of  employees  for  the  Air  America  com- 
plex was  in  excess  of  8,000).  The  company  is  in  the  process  of  being 
liquidated  because  it  is  no  longer  required.  The  Air  America  complex 
included  a  number  of  other  companies  with  the  Pacific  Corporation 
as  the  holding  company.  The  general  plan  for  liquidation  of  Air 
America  is  for  the  Pacific  Corporation  to  sell  off  Air  America,  Inc., 
and  its  affiliates.  A  private  New  York  firm  was  engaged  to  estimate 
a  fair  market  value  for  the  complex.  Although  the  Agency  con- 
ducted an  intensive  search  for  competitive  bidders,  it  was  able  to 
find  buyers  for  only  one  of  the  affiliated  companies.  The  sale  of  this 
company  was  closed  on  January  31,  1975.  The  remaining  parts  of 
Air  America  are  being  liquidated  by  sale  of  individual  assets  upon 
completion  of  existing  contracts.  Funds  realized  from  the  sales  could  be 
as  much  as  $25  million  and  will  be  returned  to  the  Treasury. 

Agency  financial  support  for  Radio  Liberty  and  Radio  Free 
Europe,  both  sizeable  proprietaries,  was  terminated  in  FY  1971  and 
responsibility  for  their  funding  and  operation  Avas  assumed  by  the 
Department  of  State. 

Southern  Air  Transport  was  sold  on  December  31,  1973  because 
its  contingency  capability  was  no  longer  needed.  The  Agency  realized 
$6,470,000  from  this  sale,  of  which  $3,345,000  was  in  cash  (including 
a  $1.2  million  award  in  arbitration  of  a  dispute  over  the  proceeds  of 
the  sale  of  an  aircraft  by  Southern  Air  Transport  after  the  sale  of 
the  company  by  the  Agency).  The  purchaser  paid  the  balance  to  Air 
America  to  retire  a  debt  owed  by  Southern  Air  Transport.  A  group 
of  employees  of  Southern  Air  Transport  filed  a  civil  action  disputing 
the  propriety  of  the  sale  of  the  company  by  the  Agency,  but  the  case 
was  dismissed  with  prejudice  on  July  17,  1974  by  a  Federal  court. 

Most  of  the  entities  of  which  the  Agency  has  divested  itself  were 
either  sold  or  given  to  witting  individuals  (former  officers,  em- 
ployees, managers,  contractors,  etc.).  A  handful  were  sold  or  given 
to  witting  individuals  who  had  no  formal  relationship  with  the  pro- 
prietary. In  several  cases,  transfer  of  the  entity  was  conditioned  as  an 
agreement  that  the  proprietary  would  continue  to  provide  goods  or 
services  to  the  CIA.  Other  methods  which  have  occasionally  been  used 
to  dispose  of  entities  include:  merger  with  another  Agency  pro- 
prietary; transfer  or  sale  of  a  proprietary  to  another  Government 
department;  and  liquidation,  with  the  remaining  assets  of  the  pro- 
prietary being  given  to  previouslv  uncompensated  participants  in  the 
venture,  or  to  other  Agency  proprietaries. 


240 

2.  The   Sale    of  Southern  Air   Transport,  Inc. 

Southern  Air  Transport  Incorporated  (SAT)  is  an  American  air 
carrier,  incorporated  in  the  State  of  Florida  on  October  31,  1949. 
From  its  inception  until  its  purchase  in  1960  by  the  Central  Intelli- 
gence Agency,  it  was  privately  owned.  It  was  purchased  by  the  CIA 
on  August  5,  1960,  and  owned  by  the  CIA  through  December  31, 
1973  when  the  Agency  sold  the  ifirm  back  to  one  of  its  original  owners. 

The  decision  to  acquire  Southern  Air  Transport  was  triggered  by 
a  change  in  the  regulations  governing  the  award  of  Military  Air 
Transport  Service  (MATS)  contracts.  On  April  1, 1960,  Air  America 
had  begun  flying  a  seven  month  MATS  contract  operating  out  of 
Tachikawa  Air  Force  Base  in  Japan,  to  other  Pacific  locations.  In 
June  of  1960,  the  Department  of  Defense  and  the  Civil  Aeronautics 
Board  changed  the  regulations  governing  the  awarding  of  MATS 
contracts  to  require  that  bidders  hold  at  least  a  Supplemental  Certifi- 
cate of  Convenience  and  Necessity  for  an  air  carrier  and  that  they 
participate  in  the  Civil  Reserve  Air  Fleet  Program.  Air  America 
did  not  meet  either  of  these  new  criteria  and  could  not  obtain  appro- 
priate waivers. 

The  Air  America  heavy  airlift  capability  represented  an  American 
asset  for  use  in  future  operational  contingencies  throughout  the  Far 
East  area.  Loss  of  the  INLETS  contract  would  result  in  underutiliza- 
tion  of  aircraft  and  air  crews,  and  the  revenues  were  needed  to 
sustain  these  assets.  Therefore,  the  CIA  proposed  that  either  Air 
America  should  obtain  the  necessary  certification,  or  that  the  Agency 
should  buy  another  commercial  firm  that  already  held  these  certifi- 
cations. The  October  1,  1960  contract  date,  the  need  for  public  hear- 
ings, and  lengthy  proceedings  militated  against  Air  America  apply- 
ing for  the  certificate.  In  order  to  avoid  lengthy  public  hearings, 
which  would  be  time-consuming  and  generate  public  exposure,  it  was 
decided  that  the  ownership  of  the  company  to  be  acquired  must  be 
kept  completely  separate  from  Air  America.  This  solution  was  con- 
curred in  by  the  CAB,  DOD,  the  CIA,  and  Air  America  management. 

It  was  anticipated  that  if  the  new  company  were  awarded  an  on- 
going MATS  contract,  it  would  actually  perform  the  flying  service 
but  would  use  equipment  under  conditional  sale  from  Air  America 
and  would  employ  personnel  transferred  from  Air  America.  Under 
inter-company  agreements  Air  America  would  provide  all  mainte- 
nance work,  ground  handling,  and  other  services  for  which  it  would 
be  reimbursed  by  the  new  company.  In  this  wav,  Air  America  would 
share  in  the  revenues  generated  by  the  MATS  contracts.  The  pro- 
posal to  purchase  a  supplemental  carrier  and  operate  it  under  the 
above  arrangement  was  approved  by  Director  of  Central  Intelligence 
Allen  Dulles  on  July  15,  1960.  Funds  from  the  Clandestine  Services 
budfi-et  for  FY  1962  were  made  available  for  the  purchase. 

After  World  War  II  there  had  been  over  200  supplemental  carriers 
in  existence.  By  1960  only  18  were  still  operating.  Air  America  man- 
agement made  a  survev  of  the  18  and  determined  that  Southern  Air 
Transnort  in  Miami,  Florida,  was  the  most  attractive  as  a  purchase 
possibility.  It  operated  two  C-46s — one  owned,  one  leased — between 


241 

Miami  and  points  in  the  Caribbean  and  South  America.  Its  associated 
company  owned  the  four  acre  property  on  which  SAT  was  located. 
Moreover,  it  operated  at  a  modest  profit  and  had  no  long  term  debts. 

Negotiations  for  the  purchase  of  SAT  were  successful  and  on  Au- 
gust 5, 1960,  the  CIA  exchanged  $307,506.10  for  all  outstanding  shares 
of  capital  stock  of  SAT  and  its  real  property  owning  affiliate.  The 
Agency  owned  these  shares  in  the  name  of  a  former  board  member  of 
Air  America. 

Under  CIA  management  Southern  Air  Transport  operated  with 
two  semi-autonomous  sections :  the  Pacific  and  Atlantic  Divisions.  The 
Pacific  Division  performed  the  MATS  contract  and  supported  Agency 
"heavylift"  requirements  in  East  Asia.  The  Atlantic  Division  con- 
tinued to  operate  in  the  Caribbean  and  South  America;  doing  the 
same  sort  of  flying  SAT  had  done  prior  to  Agency  acquisition.  The 
Atlantic  Division  was  also  able  to  furnish  support  for  certain  sensitive 
operations.  At  the  peak  of  its  activities,  the  SAT  fleet,  comprised  of 
both  owned  and  leased  aircraft,  included  Douglas  DC-6,  Boeing  727, 
and  Lockheed  L-lOO  Hercules  aircraft. 

The  Sale 

In  1972  it  became  apparent  that  the  Agency's  air  capabilities  ex- 
ceeded its  needs,  and  that  political  realities  and  future  operational  re- 
quirements in  the  post-war  era  of  Southeast  Asia  would  not  require 
large  air  proprietary  assets.  On  April  21, 1972,  the  Director  of  Central 
Intelligence  authorized  the  divestiture  of  CIA  ownership  and  control 
of  the  Air  America  complex  and  Southern  Air  Transport.  He  approved 
recommendations  calling  for:  Air  America  to  be  retained  until  the 
end  of  the  war  in  Southeast  Asia ;  the  immediate  elimination  of  the 
Pacific  Division  of  SAT ;  the  sale  of  two  727  aircraft  leased  to  SAT 
by  Air  America;  and  subsequent  divestiture  of  Agency  ownership 
and  control  of  the  remainder  of  SAT.®^  Specific  note  was  made  that 
conflict  of  interest  should  be  avoided  and  that  no  employee  should 
receive  a  windfall  benefit  as  a  result  of  these  transactions.^^ 

In  May  1972,  two  Agency  officials  met  with  the  Chairman  of  the 
Civil  Aeronautics  Board  and  his  Administrative  Assistant  to  seek 
informal  advice  as  to  the  best  way  to  disengage  from  SAT.  Three 
alternatives  were  discussed:  (1)  dissolve  the  company  and  sell  the 
assets;  (2)  sell  the  assets  to  the  current  operators  of  the  company; 
(3)  sell  SAT  to,  or  merge  SAT  into,  one  of  the  other  supplemental 
carriers. 

The  CAB  chairman  discouraged  option  (3)  because  it  would  in- 
volve public  hearings  and  would  be  subject  to  criticism  by  the  other 
supplementals :  Option  (1),  although  least  troublesome  from  the  legal 


^  The  Director  determined  that  "we  no  longer  should  retain  air  proprietaries 
purely  for  contingent  requirements  and  that  on  the  record,  therefore,  the  Agency 
should  divest  itself  of  the  Southern  Air  Transport  complex  entirely."  He  stated 
that  the  desirable  course  of  action  would  be  dissolution,  although  he  realized 
that  the  problems  were  many  and  complex.  Also,  he  did  not  rule  out  other  solutions 
which  might  achieve  the  end  and  yet  better  satisfy  the  interests  of  all  concerned. 

^  A  condition  imposed  by  the  DCI  was  that  "in  the  disposition  of  any  of  the 
assets  involved  nothing  inure  to  the  benefit  of  Agency  employees  or  former  em- 
ployees or  persons  whose  relationship  with  the  Agency  has  been  or  is  of  such 
a  nature  as  might  raise  a  question  of  conflict  of  interest." 


242 

and  security  standpoints,  would  further  reduce  the  shrinking  num- 
ber of  U.S.  supplementals  (by  1972,  there  were  only  eleven  supple- 
mental carriers  left)  and  would  be  unfair  to  SAT  employees.  The  CAB 
officials  had  no  objections  to  option  (2). 

On  May  5, 1972  the  DCI  was  presented  with  the  results  of  the  meet- 
ing with  the  CxVB  chairman.  He  approved  the  recommendation  to  ex- 
plore the  sale  of  the  equity  in  SAT  to  the  current  management.  It 
was  noted  that  SAT  had  been  operating  as  a  supplemental  carrier  for 
25  years,  that  none  of  the  employees  of  SAT  had  ever  been  an  em- 
ployee of  the  Agency,  and  that  both  the  Department  of  Defense  and 
the  chairman  of  the  CAB  considered  it  in  their  best  interests  to  keep 
SAT  as  a  viable  carrier.  The  rationale  behind  selling  SAT  intact  to 
its  management  was : 

(1)  Liquidation  would  deprive  the  United  States  of  a  useful  air 
carrier  and  would  be  unfair  to  the  employees. 

(2)  Sale  of  SAT  on  the  open  market  would  generate  an  unaccept- 
able level  of  public  interest  and  scrutiny.  A  publicly  advertised  disposi- 
tion would  run  contrary  to  the  Director's  statutory  mandate  to  protect 
intelligence  sources  and  methods. 

(3)  Although  a  potential  for  conflict  of  interest  and  windfall  profit 
existed,  the  sale  of  SAT  to  its  management  would  best  satisfy  the 
requirements  of  everyone  involved. 

The  DCI  was,  apparentlv,  allowed  this  flexibility  in  method  of  dis- 
posal by  statute.  40  U.S.C.  §474(17)  provides  that  nothing  in  the 
regulations  relating  to  disposal  of  surplus  government  property  shall 
affect  any  authority  of  the  CIA.  In  addition,  50  U.S.C.  §  403(d)  (5) 
provides  that  the  Director  of  Central  Intelligence  is  responsible  for 
protecting  intelligence  sources  and  methods  from  unauthorized  dis- 
closure. It  was  determined  that  sale  of  SAT  stock  to  one  of  its  former 
owners  in  a  confidential  manner  would  prevent  damage  which  could 
result  from  disclosure  of  CIA  ownership. 

Agency  officials  began  exploring  ways  in  which  SAT  could  be  sold  to 
its  management,  without  permitting  a  windfall  to  accrue  to  the  buyer, 
and  in  a  way  that  could  not  be  construed  as  a  conflict  of  interest.  To 
establish  a  reasonable  selling  price,  the  Agency  asked  a  Certified 
Public  Accounting  firm  to  perform  a  valuation  study.  The  accounting 
firm  in  turn  engaged  an  aviation  consultant  firm  to  conduct  an  eval- 
uation of  the  aircraft.  The  following  values  were  established : 

Millions 

(1)  Book  value  of  SAT $3.  900 

(2)  Estimated  total  value  of  SAT  capital  stock  on  open  market-     2.645 

(3)  Disposal  as  going  concern 2. 100 

(4)  Liquidation  value 1.250 

(5)  Agency  investment 1.  500 

Based  on  these  figures,  the  Executive  Director-Comptroller  on  August 
17, 1972,  approved  an  asking  price  of  $2.7  million.  Sale  at  this  price  to 
the  management  would  require  simultaneous  payment  in  full  of  the 
$3.2  million  note  payable  to  Air  America  through  an  associated  land 
holding  compan3\  and  would  not  include  any  equity  in  the  lease  pur- 
chase agreement  between  SAT  and  Air  America  for  a  Lockheed  L 
100-30  Hercules  aircraft.  Although  this  $2.7  million  price  was  less 
than  the  $3.9  million  book  value,  it  did  exceed  the  fair  market  value 
of  the  company  as  calculated  by  professional  appraisers.  The  ap- 
praisals were  based  not  on  depreciated  purchase  prices  for  assets,  as 


243 

reflected  in  book  values,  but  on  the  earning  power  of  the  assets  adjusted 
to  "present  vakie"'  and  the  current  resale  value  for  all  assets. 

On  August  23,  1972,  the  former  owner  was  advised  that  the  asking 
price  for  SAT  was  $5.9  million;  $2.7  million  for  the  acquisition  of 
stock  and  $3.2  million  for  payment  of  debt  to  Air  America.  A  deadline 
date  of  October  1,  1972  was  established;  otherwise  the  firm  would  be 
dissolved  and  the  assets  liquidated.  Although  the  former  owner  con- 
tended the  asking  price  should  be  reduced  because  the  outstanding  loan 
to  Air  America  had  been  reduced  since  the  date  of  the  study,  he  stated 
that  he  would  attempt  to  work  out  financing  within  the  deadline  date 
of  October  1,  1972.  This  deadline  was  extended  by  the  Agency  to 
December  4, 1972. 

On  December  5,  1972,  the  former  owner  submitted  an  offer  to  buv 
SAT  for  $5  million :  $1,875  million  for  the  acquisition  of  SAT  and 
$3,125  million  to  pay  off  the  debt  to  Air  America.  On  December  26, 
1972,  the  Executive  Director-Comptroller  approved  the  recommenda- 
tion that  the  offer  be  rejected  and  that  if  the  former  owner  was  unable 
to  raise  by  January  20,  1973,  the  additional  funds  required  for  the 
original  purchase  price  of  $5.9  million,  including  the  Air  America 
debt,  that  the  Agency  proceed  with  liquidation  plans  and  the  dis- 
missal of  SAT  employees  not  later  than  February  1,  1973. 

On  January  11,  1973,  a  new  proposal  was  submitted  to  purchase 
SAT  for  a  total  price  of  $5,605,000.  The  former  owner  cited  a  tenta- 
tive commitment  for  a  loan  of  $4.0  million  and  his  offer  was  con- 
tingent upon  an  additional  loan.  The  offer  called  for  a  total  payment 
of  $5,605,000  broken  down  as  follows : 

In  millions 

Acquisition  of  SAT  stock $2. 145 

Payment  of  debt  to  Air  America 3. 125 

Credit  for  payments  to  Air  America  since  10  June  1972  in  liquida- 
tion of  long  term  debt .  335 

Total  payment 5.605 

Prior  to  accepting  the  offer,  CIA  officers  again  discussed  the  sale 
of  SAT  with  a  CAB  representative,  who  indicated  that  the  board 
would  be  interested  in  seeing  SAT  continued.  The  CAB  representa- 
tive stated  that  it  would  not  be  necessary  to  surface  tlie  Agency's  name 
as  the  true  owner  of  SAT  in  the  CAB  proceedings,  and  that  he  did  not 
anticipate  any  problems  with  other  supplemental  carriers  as  a  result 
of  the  sale. 

On  January  19,  1973,  the  DCI  approved  the  sale  of  SAT.  It  was 
noted  that  the  offer  was  within  5  percent  of  the  original  asking  price, 
was  above  the  independent  evaluation  for  sale  as  a  going  concern,  and 
was  at  a  figure  which  would  not  seem  to  give  the  buyer  windfall  profit. 
The  sale  would  constitute  a  clean  break-away  of  SAT  from  the 
Agency  with  the  exception  of  a  one  year  extension  on  the  lease/pur- 
chase agreement  with  Air  America  for  an  L  100-30  aircraft.  This 
agreement  for  sale  between  the  former  owner  and  the  Agency  in- 
cluded a  provision  that  any  profit  derived  from  the  sale  of  assets 
within  one  year  would  constitute  a  windfall  and  would  be  added  to 
the  total  sale  price. 

On  FelH-uary  28,  1973,  the  Board  of  Directors  of  SAT  executed 
corporate  action  on  the  Agreement  for  Sale  of  SAT  to  the  former 
owner.  Closing  date  was  established  at  not  later  than  30  days  after 
CAB  approval.  On  March  1, 1973  application  for  approval  of  acquisi- 


244 

tion  of  control  of  SAT  by  the  former  owner  was  filed  with  the  CAB 
under  Docket  No.  252-64.  It  was  anticipated  that  CAB  approval  would 
be  forthcoming  within  60  days. 

Subsequent  to  the  agreement  for  sale  and  application  to  CAB,  sev- 
eral supplemental  carriers  generated  a  great  deal  of  pressure  to  pre- 
-vent  SAT  from  being  sold  to  the  former  owner  and  to  prevent  SAT 
from  operating  as  a  supplemental  carrier.  This  pressure  was  applied 
through  Congressional  representatives,  the  General  Accounting  Office, 
and  the  General  Services  Administration.  The  various  supplemental 
carriers  objected  to  the  sale  of  SAT  for  a  variety  of  reasons.  Basically 
each  supplemental  objected  to  the  portions  of  SAT's  operating  author- 
ity which  would  allow  SAT  to  compete  with  it.  Specifically,  repre- 
sentatives of  one  competitor  indicated  that  it  would  not  oppose  the 
sale  if  the  new  owner  would  voluntarily  renounce  his  rights  to  Trans- 
Pacific  routes. 

Two  other  companies  objected  to  SAT  operating  any  aircraft  as 
large  or  larger  than  a  727  in  the  Far  East.  Another  objected  to  SAT 
bidding  on  any  domestic  MAC  contracts.  Restricting  SAT  to  satisfy 
all  potential  competitors  could  make  SAT  sufficiently  unattractive  as 
a  profitable  investment  that  financing  would  be  unobtainable.  With 
this  in  mind  the  Agency  took  the  position  that  agreement  for  sale  of 
SAT  had  been  executed,  subject  to  CAB.  approval.  If  the  CAB  ruled 
against  the  sale  and  ownership  reverted  to  the  Agency,  the  Agency 
would  cease  any  bids  or  service  under  MAC  contracts  and  dissolve 
SAT. 

Two  supplemental  expressed  interest  in  bujdng  SAT.  One  did  not 
make  a  cash  offer,  but  on  June  29,  1973,  the  other  made  a  cash  offer 
of  about  $2  million  in  excess  of  what  the  former  owner  liad  offered. 
According  to  the  Agency,  there  were  compelling  reasons  not  to  pur- 
sue these  offers.  Agency  officers  had  reason  to  believe  tliat  the  supple- 
mentals  were  not  interested  in  actually  buying  SAT  as  they  were 
attempting  to  secure  a  commitment  from  the  Agency  which  could  be 
used  to  compromise  the  CIA's  position  in  future  CAB  hearings.  Three 
reasons  for  not  accepting  either  offer  were : 

(1)  Any  merger  with  another  supplemental  carrier  would 
necessitate  a  very  difficult  series  of  CAB  hearings  during 
which  all  other  major  supplementals  would  certainly  voice 
loud  and  strenuous  objections. 

(2)  To  sell  the  firm  on  a  sole  source  basis  to  either  outside 
buyer  without  soliciting  public  bids  would  be  contrary  to 
sound  business  practice,  and  would  attract  even  more  adverse 
publicity. 

(3)  Both  offers  were  made  directly  to  officials  of  the  CIA 
and  not  to  the  stockholders  of  record.  Although  the  relation- 
ship between  the  CIA  and  SAT  was  the  subject  of  much 
public  speculation,  the  relationship  was  still  classified  and  an 
acceptance  of  either  offer  would  be  a  violation  of  security 
and  cover. 

Dissolution  6i  the  firm,  or  sale  to  the  former  owner,  continued  as  the 
most  acceptable  method  of  divestiture,  subject  to  CAB  approval. 
In  view  of  the  objections  by  other  supplemental  carriere  to  the  sale 
of  SAT  to  its  former  owner,  and  the  award  by  the  Air  Force  of  a 
Logistics  Air  contract  to  SAT,  the  DCI  directed  on  July  31,  1973, 


245 

that  SAT  be  dissolved,  that  it  withdraw  from  the  LOGAIR  contract 
and  withdraAV  its  application  for  renewal  of  supplemental  certificate. 
The  former  owner  was  advised  of  this  decision  and  made  a  counter 
offer  to  purchase  the  company  under  his  previous  offer.  He  also  pro- 
posed that  SAT  return  its  supplemental  certificate,  withdraw  applica- 
tion for  acquisition  for  sale  from  CAB,  and  operate  as  a  commercial 
carrier  under  Federal  Aviation  Regulation  Part  121  authoi'ity.  Such 
action  would  remove  SAT  from  direct  competition  with  the  supple- 
mentals,  but  retain  a  worthwhile  market  in  which  to  operate.  Addi- 
tionally, no  CAB  hearing  would  be  necessary  to  obtain  this  type  of 
operating  authority.  On  October  1,  1973,  the  DCI  agreed  to  entertain 
the  proposal  to  continue  the  sale  of  SAT  as  a  Part  121  operator,  on 
the  condition  that  the  former  owner  obtain  prompt  financing.  Other- 
Avise,  the  firm  would  be  dissolved. 

On  October  5,  1973,  the  SAT  Board  of  Directors  approved  and 
executed  a  new  agreement  for  sale  including  the  following  provisions : 

(1)  The  former  owner  to  acquire  stock  of  SAT  and  Actus 
for  $2,145,000. 

(2)  The  former  owner  to  pay  off  $3,125,000  owed  to  Air 
America. 

(3)  Agreement  subject  to  the  former  owner  obtaining 
$4  million  loan. 

(4)  Agreement  to  be  subject  to  SAT  withdrawing  applica- 
tion for  renewal  of  its  Certificate  of  Necessity  and  Con- 
venience for  an  Air  Carrier  (Supplemental  Certificate). 

(5)  Lease/purchase  agreement  for  L-lOO  between  AAM 
and  SAT  to  be  extended  one  year. 

(6)  Anti- windfall  provision  to  be  effective  for  one  year 
from  date  of  sale. 

On  November  29,  1973,  the  former  owner  received  a  commitment 
from  The  First  National  Bank  of  Chicago  for  a  loan  of  $4.5  million 
thereby  making  the  October  5,  1973  agreement  operative.  On  Novem- 
ber 30,  1973,  the  DCI  approved  the  sale  of  SAT  in  accordance  with 
the  October  5  agreement  for  sale.  On  the  same  day,  the  application  to 
the  CAB  for  acquisition  of  SAT  under  Docket  No.  252-64  was  with- 
drawn and  petition  for  cancellation  of  certificate  and  termination  of 
exemption  authority  was  filed  with  an  effective  date  of  December  30, 
1973.  On  December  31,  1973  the  sale  was  closed,  the  note  to  Air 
America  was  paid  off,  and  the  former  owner  became  the  sole  owner 
of  SAT. 

In  early  January  1974,  CIA  officials  learned  from  Air  America 
management  that  SAT  had  exercised  the  purchase  option  of  the  lease/ 
purchase  agreement  between  SAT  and  Air  America  for  the  Lockheed 
L  100-30  Hercules  aircraft.  The  option  sale  price  from  Air  America 
was  $3,150,000.  SAT  immediately  resold  the  aircraft  to  Saturn  Air- 
ways for  $4,350,000,  for  a  profit  of  $1.2  million.  The  Agency  inter- 
preted this  sale  as  a  violation  of  the  anti-windfall  provisions  of  its 
agreement  with  the  owner.  On  January  25, 1974,  Air  America  executed 
an  Escrow  and  Arbitration  Agreement  on  behalf  of  the  CIA  with 
SAT  on  the  disputed  $1.2  million  profit.  The  agreement  called  for 
$750,000  to  be  placed  in  escrow  with  the  American  Security  and 
Trust  Company  of  Washington,  D.C.  The  escrow  funds  were  to  be 
held  as  a  Certificate  of  Deposit  purchased  at  the  prevailing  market 


\  246 

rate.  It  was  further  agreed  that  SAT  would  also  place  in  escrow  a 
Promissory  Note  to  Air  America  for  the  remaining  $450,000  of  the 
disputed  amount.  The  note  was  to  bear  interest  at  the  same  rate  cur- 
rently being  earned  on  the  Certificate  of  Deposit  in  escrow.  It  was 
arranged  that  the  escrow  deposits  plus  accrued  interest  would  be  paid 
to  the  party  deemed  in  favor  by  an  arbitrator  with  each  party  to  pay 
one-half  of  the  costs  of  arbitration.  On  September  5,  1974  the  arbi- 
trator ruled  in  favor  of  Air  America.  This  decision  caused  an  addi- 
tional $1,304,243  to  accrue  to  the  Agency  from  the  SAT  sale.  This 
was  the  sum  of  the  $1.2  million  under  arbitration  plus  accrued  interest, 
less  the  Agency's  share  of  arbitration  costs. 

3.  Declassification  of  RelationsMqj  With  CIA 

In  March  1974  the  employees  of  SAT  retained  an  attorney  and 
brought  a  class  action  suit  in  U.S.  District  Court  for  Southern  Flor- 
ida against  Southern  Air  Transport,  Inc.  and  the  Central  Intelligence 
Agency.  The  employees  as  plaintiffs  sued  for  injunctive  relief  and 
damages.  In  this  suit  the  employees  alleged : 

(1)  That  the  CIA  sold  the  stock  of  SAT  to  the  former 
owner  illegally, 

(2)  That  SAT  had  embarked  on  a  program  to  sell  off  its 
assets,  depriving  the  plaintiffs  of  employment, 

(3)  That  the  plaintiffs  were  entitled  to  the  benefits  of  the 
CIA  Retirement  and  Disability  System,  and 

(4)  That  their  civil  rights  had  been  violated. 

In  view  of  the  publicity  arising  from  the  allegations  made  by  the 
other  supplemental  carriers  during  the  CAB  proceedings  and  the 
publicity  arising  from  this  suit,  it  was  determined  that  no  useful 
purpose  would  be  served  by  continuing  to  deny  the  true  ownership 
relationship  of  SAT  by  CIA.  The  operational  activities  performed 
by  SAT  on  behalf  of  CIA  were  and  remain  classified.  As  a  part  of  the 
Agency's  defense  in  this  suit,  an  affidavit  of  the  Deputy  Director  for 
Management  and  Services  of  the  CIA  was  presented  in  court. 

In  the  affidavit  he  delineated  the  relationship  between  the  CIA  and 
SAT  and  the  authorities  for  purchasing  and  later  selling  the  capital 
stock  of  SAT.  He  also  defined  the  employment  status  of  the  plaintiffs 
as  not  being  government  employees  and  not  being  CIA  employees, 
and  therefore  not  being  eligible  for  participation  in  the  CIA  Retire- 
ment and  Disability  System. 

In  the  Order  Granting  Motion  for  Summary  Judgment,  the  court 
found  that  the  sale  of  SAT  capital  stock  was  not  in  violation  of  law ; 
that  the  plaintiffs'  claim  to  be  U.S.  Government  employees  and  en- 
titled to  CIA  retirement  benefits  was  invalid ;  and  that  the  SAT  em- 
ployees were  not  deprived  of  any  civil  right  under  any  state  law. 
As  a  result,  the  action  was  dismissed  with  prejudice  as  to  the  plaintiff. 
Although  this  suit  did  cause  the  relationship  between  the  Agency  and 
SAT  to  be  officially  disclosed,  it  did  establish,  in  a  court  of  law,  two 
points  favorable  to  the  Agency : 

a.  The  sale  of  SAT  violated  no  laws  and  was  within  the 
authority  of  the  DCI ;  and 

b.  The  directly  hired  employees  of  CIA  owned  proprietary 
firms  such  as  SAT  do  not  necessarily  enjoy  the  status  of  Fed- 
eral Government  employees. 


247 


If.  Possible  Confyict  of  Interest 


In  the  SAT  divestiture,  the  Agency  took  precautions  to  avoid  con- 
flict of  interest.  A  retired  staff  agent  who  had  been  the  IVIanaging 
Director  of  Air  America,  Inc.,  made  several  offers  to  acquire  SAT. 
In  early  1972  he  and  some  other  members  of  Air  America  management 
made  an  informal  offer  to  buy  SAT.  On  August  7,  1972,  the  retired 
staff  agent  told  the  Agency  official  responsible  for  the  management 
of  SAT  and  Air  America,  that  he,  in  association  with  two  supple- 
mentals,  wanted  to  offer  "book  value"  for  SAT.  He  stated  that  they 
were  not  interested  in  SAT's  certificate,  but  rather  in  the  equipment 
and  that  if  allowed  to  make  an  offer,  it  would  be  one  that  would  not 
require  CAB  hearings.  In  both  cases,  the  CIA  General  Counsel  deter- 
mined that  due  to  the  offeror's  close  association  with  the  Agency,  the 
offer  was  miacceptable.  In  later  discussions,  the  retired  staff  agent 
asked  to  be  allowed  to  bid  on  SAT  in  open  bidding.  The  General 
Counsel's  position  on  this  request  was  that  open  bids  would  not  solve 
the  conflict  of  interest  problems.  In  any  transaction  this  complex, 
selecting  the  bid  is  only  a  preliminary  to  the  negotiated  flnal  sale. 

Another  potential  conflict  of  interest  involved  another  supplemental 
air  carrier.  From  the  time  the  Agency  first  decided  to  divest  until  the 
sale  was  consummated,  this  company  expressed  continuing  interest  in 
merging  with  SAT.  Their  representative  was  a  former  Director  of 
Central  Intelligence,  who  made  literally  dozens  of  phone  calls  to 
Agency  officials  and  arranged  many  meetings ;  all  for  the  purpose  of 
pressing  this  company's  case  to  purchase  SAT.  The  company  also 
proposed  to  arrange  "shadow  financing*'  for  the  former  owner  of  SAT 
if  he  would  agi^ee  to  merge  at  some  later  time.  These  offers  were  all 
rejected  because  merger  with  another  supplemental  was  not  an  accept- 
able solution  and  the  apparent  conflict  of  interest  was  too  great. 

The  sale  of  SAT  to  its  former  owner  was  another  area  of  possible 
conflict  of  interest.  "While  the  f onner  OAvner  was  not  an  employee  of  the 
Federal  Government  during  any  period  of  association  with  SAT  or 
CIA,  he  had  been  the  owner  prior  to  CIA  acquisition,  and  had  been 
nominal  president  of  SAT  during  Agency  ownership.  This  potential 
area  of  conflict  had  been  recognized  at  the  outset  of  sale  proceedings, 
and  the  Agency  obtained  third  party  professional  evaluation  and 
restricted  windfall  profits  to  prevent  such  conflicts.  The  underlying 
philosophy  for  sale  back  to  the  former  owner  was  to  restore  the  status 
quo  ante^  i.e.  return  of  the  corporation  to  its  previous  ownei'ship  once 
the  need  for  a  Government-controlled  entity  had  terminated. 

E.  Financial  Aspects 

1.  Relations  with  Other  U.S.  Government  Agencies 

Management  and  control  of  proprietaries  often  requires  "coopera- 
tive interface"  with  outside  agencies  to  gain  beneficial  working  rela- 
tionships and  appropriate  authorizations.  These  relationships  are  de- 
scribed briefly  below. 

For  those  proprietaries  which  maintain  commercial  books  and  other 
financial  records,  commercial  managers  prepare  United  States  and 
State  tax  returns  annually,  based  on  the  corporation's  financial  rec- 


248 

ords.  For  other  entities  where  only  internal  Agency  records  are  main- 
tained, Agency  specialists  prepare  tax  returns  which  reflect  normal 
operations  of  a  legitimate  commercial  business.  The  Agency  maintains 
close  coordination  with  the  Internal  Kevenue  Service,  which  is  aware 
of  the  CIA's  use  of  proprietary  commercial  entities  but  not  of  specific 
proprietaries'  identities.  In  the  event  the  IRS  singles  out  an  Agency 
proprietary  for  an  audit,  the  Office  of  General  Counsel  notifies  IRS 
of  CIA  ownership.  The  IRS  then  cancels  the  audit  to  conserve 
manpower. 

Operation  of  the  air  proprietaries  has  resulted  in  contact  with  the 
Civil  Aeronautics  Board,  the  Federal  Aviation  Agency  and  the  Na- 
tional Transportation  Safety  Board.  Specific  problems  have  been  dis- 
cussed, usually  between  the  Office  of  General  Counsel  of  the  agency 
concerned  and  the  CIA  General  Coun^l. 

The  air  proprietaries  have  dealt  with  State  Department  and  the 
Agency  for  International  Development,  generally  on  a  contractor/ 
customer  basis,  although  senior  personnel  of  those  agencies  have 
been  advised  by  the  Agency  of  its  ownership  of  the  companies. 

Those  proprietaries  engaged  in  the  shipment  of  weapons  or  other 
items  on  the  Munitions  Control  list  have  required  CIA  assistance  in 
obtaining  the  necessary  export  licenses.  The  ownership  of  the  com- 
panies has  been  discussed  with  the  State  Department  Office  of  Muni- 
tions Control,  and  the  Bureau  of  Alcohol,  Tobacco  and  Firearms. 
While  the  radio  proprietaries  were  funded  by  the  CIA,  they  received 
policy  guidance  from  the  Department  of  State  to  ensure  that  their 
broadcasts  conformed  to  United  States  foreign  policy.  The  Agency 
has  intervened  with  the  Department  of  Labor  on  behalf  of  survivors 
of  employees  of  the  proprietaries  in  order  to  assist  them  in  receiving 
the  available  benefits  under  the  applicable  Workmen's  Compensation 
Acts.  The  Agency  has  also  interceded  with  the  Defense  Department 
to  have  proprietaries'  contracts  exempted  from  the  Renegotiation 
Board. 

The  CIA  has  requested  that  the  Air  Force  consider  the  interests 
of  the  Agency  in  awarding  com.mercial  contracts  to  proprietaries. 
Initially  this  was  done  in  the  mid-1950s  on  the  basis  of  a  policy  deci- 
sion by  the  Operations  Coordination  Board  that  Air  America  was  an 
instrument  of  value  to  national  security.  Air  America  was  then  oper- 
ating at  a  deficit,  and  the  Agency  was  able  to  maintain  a  standby  capa- 
bility without  budget  subsidies  if  it  could  obtain  enough  business  to 
support  large  commercial  aircraft.  Finally,  the  United  States  Forest 
Service  was  advised  of  the  ownership  of  a  proprietary  and  asked  to 
award  contracts  to  the  proprietary  to  assist  the  development  of  a 
commercial  posture. 

2.  Magnitiide  of  United  States  Financial  Stokes 

Most  proprietaries  are  small-scale  operations.  In  many  cases  (the 
notionals),  the  overseas  proprietary  actually  conducts  no  business  at 
all ;  it  simply  has  a  commercial  charter,  staff,  and  cover  arrangements 
for  Agency  collection  and  action  projects. 

Proprietary  income  consists  of  a  mixture  of  CIA  subsidy  and  in- 
come. In  some  cases,  the  outside  income  is  from  sources  outside  the 
United  States  Government  income,  e.g..  Air  America  received  income 


249 

for  aircraft  maintenance  of  foreign  airlines  in  Southeast  Asia.  For 
the  most  part,  proprietary  income  is  in  the  form  of  "cross-orders"  from 
CIA  and  otliei-  Government  agencies.  For  example,  a  CIx^  paramilitaiy 
project  placed  orders  for  aircraft  engines  and  pilot  services  with 
the  Agency  proprietary,  Intermountain  Aviation,  Inc.,  and  AID 
contracted  with  Air  America  to  carry  rice  shipments  in  Laos.  In  this 
sense,  many  proprietaries  are  analogous  to  what  are  traditionally 
termed  "intragovernmental  funds"  or  "industrial  funds"  in  United 
States  Government  budget  and  accounting  manuals. 

Compared  with  earlier  years,  the  current  size  of  proprietary  ex- 
penditures has  markedly  declined.  The  potential  for  future  expansion 
is  nevertheless  present.  Indeed,  new  proprietaries  have  been  formed 
within  the  last  several  years. 

In  terms  of  United  States  budgetary  impact,  proprietaries  do  not 
add  significant  new  capital  to  CIA  available  resources,  i.e.,  while 
they  have  a  very  large  expenditure  level  and  momentum  over  the 
years,  most  of  these  expenditures  originated  in  the  CIA  and  other 
United  States  Government  appropriations,  and  the  net  profits  gen- 
erated by  outside  business  and  investment  have  been  relatively  small. 
Another  way  of  interpreting  the  figures  is  to  observe  that  nearly  half 
the  $1.6  billion  gross  income  of  CIA  proprietaries  has  been  supplied 
by  sources  outside  the  CIA. 

The  Committee  reviewed  the  pattern  of  income,  expense,  and  net 
United  States  investment  for  the  twenty  largest  proprietaries  now 
active,  including  their  financial  experience  in  the  twelve  months  pre- 
ceding June  30,  1975.  The  two  largest  proprietaries.  Air  America  and 
the  insurance  complex,  dwarf  the  rest.  While  Air  America  will  be 
phased  out  by  June  30,  1976,  ending  the  CIA-owned  airlift  capability 
and  returning  an  estimated  $20  million  to  the  United  States  Treasury, 
the  insurance  complex  will  continue. 

In  programmatic  terms,  the  contrast  between  the  current  low  levels 
of  proprietary  activity  and  the  high  levels  of  five  years  ago  reflects 
the  decline  of  paramilitary  operations  in  Southeast  Asia.  Large  vol- 
umes of  outside  orders  by  Defense  and  AID,  along  with  sizable  levies 
by  CIA  components,  and  maintenance  and  passenger  income  from 
commercial  operations,  were  generated  by  a  covert  war. 

Looking  toward  the  future,  will  new  air  proprietaries  be  estab- 
lished? The  CIA  thinks  not,  but  the  matter  is  not  resolved.  The  ulti- 
mate question  is  whether  there  will  be  future  United  States  involve- 
ment in  covert  wars — and  if  so,  can  some  substitute  for  CIA-owned 
air  support  meet  the  operational  requirements  of  secure,  well-main- 
tained local  aircraft  ?  The  Chief  of  CSS  suggested  that  third-country 
assets  could  be  used  instead.  Another  possibility  is  the  use  of  United 
States  military  aircraft,  overtly  or  "sanitized." 

One  thing  is  clear:  CIA  sees  itself  as  entering  a  different  era  of 
proprietaries.  It  has  rejected  the  long-held  doctrine  of  "standby"  capa- 
bility, i.e.,  the  notion  that  it  is  worth  investing  considerable  capital 
and  operating  resources  in  airlift,  sealift,  and  other  assets  primarily 
targeted  toward  contingency  requirements.  Agency  representatives 
maintain  that  the  CIA  is  keeping  proprietaries  focused  on  current 
operational  tasks.  The  test  of  retention  is  the  utility  of  a  proprietary 
in  executing  assigned  tasks  instrumental  to  approved  Agency  projects. 


69-983  O  -  76  -  17 


250 

Generally,  the  notionals  have  increased  by  about  30  percent  since 
1967,  This  reflects  a  policy  of  increasing  the  number  of  cutout  arrange- 
ments to  increase  security,  i.e.,  to  reduce  one  likelihood  of  outside 
discovery  of  agents  or  case  officers  working  under  cover  of  the  end- 
point  notional  by  introducing  intermediate  notionals  for  payments  or 
identity  backstops. 

What  are  the  basic  distinctions  of  one  type  of  proprietary  from 
another?  First,  extemal  registration  divides  the  total  in  half.  Those 
which  have  some  form  of  legal  standing  with  domestic  and  foreign 
corporate  regulatory  and  tax  authorities  are  subject  to  external  gov- 
ernmental scrutiny.  This  occasions  additional  expenses  and  manpower 
to  assure  that  in  all  respects  this  group  of  proprietaries  operates  in 
accordance  with  local  law  and  commercial  expectations.  The  second 
group,  the  notionals,  exist  only  as  names  on  doors,  in  phone  director- 
ies, and  on  stationary.  Backstopping  for  identification  of  these  pro- 
prietaries is  provided  by  Agency  switchboards,  mailstops,  and  check 
issuance. 

The  next  level  of  distinction  is  within  the  class  of  legally  I'egistered 
proprietaries:  those  which  carry  on  a  commercial  income-producing 
operation  as  contrasted  to  those  which  are  simply  cover  arrangements. 
Within  the  class  of  commercial  proprietaries  which  produce  income, 
there  is  a  distinction  between  those  which  are  wholly  dependent  upon 
CIA  for  income  (in  the  form  of  orders  placed  and  subsidies)  and 
those  which  have  mixed  outside  and  inside  income.  Even  for  those 
with  mixed  income,  it  is  possible  to  distinguish  those  which  have  out- 
side income  wholly  within  the  United  States  Government  (i.e.,  a  mix 
of  CIA-derived  income  and  income  from  other  Government  agencies) 
from  those  which  have  botli  United  States  Government  income  and 
income  from  private  contracts. 

3.  Vwihility  in  the  Budget 

Budgetary  accountability  to  the  President  and  Congress  depends 
upon  the  extent  to  which  the  Federal  agencies'  budget  requests  pro^dde 
information  to  facilitate  evaluation.  Circular  A-11,  issued  by  the 
Office  of  Management  and  Budget,  prescribes  the  financial  schedules 
and  explanatory  data  which  all  Federal  agencies  must  provide  in  their 
budget  submissions.  These  provisions  are  consistent  with  the  Budget 
and  Accounting  Acts  of  1920  and  1950.  The  Central  Intelligence 
Agency  regards  itself  as  subject  to  these  prescriptions.  The  Agency 
limits  the  application  of  this  principle  to  providing  only  the  A-11 
materials  which  0MB  and  the  Congress  specifically  request.  This 
policy  has  resulted  in  near  invisibility  of  proprietaries  in  the  CIA 
iDudget  submission. 

Circular  A-11  requires  agencies  to  provide  schedules  and  narratives 
for  each  public  enterprise  or  intragovernmental  fund.  This  data  is 
to  include  all  sources  of  funding  purposes  and  levels  of  expenditure, 
and  approximate  indications  of  performance  through  comparisons  of 
past  and  proposed  funding  by  activity.  Under  these  regidations,  it 
appears  that  the  CIA  should  have  been  providing  a  complete  set  of 
schedules  for  the  proprietaries  which  actually  do  business,  i.e.,  exclud- 
ing notionals. 

The  question  of  the  programmatic  impact  of  proprietaries  should 
also  be  considered.  While  proprietaries  have  been  heavily  involved 


2151 

in  CIA  intelligence  collection  and  covert  action,  these  activities  have 
not  been  reflected  in  the  CIA  budget  submission.  A  policy  review 
of  the  budget  requires  programmatic  judgments  of  the  necessity  and 
appropriate  use  of  proprietaries  in  overseas  areas.  The  Contingency 
Reserve  Fund  is  an  example  of  why  such  clear  budgetary  information 
is  necessary.  Recent  debate  concerning  U.S.  involvement  in  Angola 
has  brought  into  sharp  focus  the  role  of  this  fund.  All  United  States 
aid  to  forces  in  Angola  came  from  the  Contingency  Reserve. 

The  only  place  in  the  budgets  of  the  CIA  where  proprietaries  have 
assumed  even  a  limited  visibility  is  in  the  years  when  supplemental 
financing  was  needed  to  establish  or  strengthen  a  proprietary.  When 
such  financing  is  necessary,  the  budget  shows,  tersely,  that  Con- 
tingency Reserve  drawdowns  have  been  made.  For  example,  one  past 
budget  showed  a  certain  amount  to  subsidize  Radio  Free  Europe,  but 
provided  no  justifying  materials.  This  practice  reflects  the  unwritten, 
2)ost  hoc  nature  of  the  Contingency  Reserve  financing  process.  In  ef- 
fect, these  practices  allow  executive  branch  "supplementals"  in  which 
Congress  is  informed  after  the  0MB  has  acted. 

The  budget  does  not  normally  indicate  Agency  intentions  to  create 
a  proprietary  in  the  budget  year  ahead.  For  any  other  Federal  agency, 
establishing  a  new  publicly  owned  enterprise  without  advance  notice 
to  the  Appropriations  and  substantive  committees  of  Congress  would 
be  proscribed.  Proprietaries  which  require  only  small  subsidies  to  get 
under  way  are  funded  by  the  CIA  without  supplemental  financing, 
i.e.,  within  its  regular  budget.  Therefore,  these  proprietaries  are  com- 
pletely invisible  in  the  Agency  budget  submission. 

F.  Some  General  Considerations 

1.  The  Relaticmship  of  Utility  to  Size 

The  Committee's  review  revealed  a  dilemma  faced  by  CIA  planners. 
Proprietaries  can  sometimes  be  most  effective  in  operations  when  they 
are  large ;  indeed,  as  in  Laos,  they  may  be  impelled  toward  enormity 
by  the  very  nature  of  the  operation.  Yet  large  size  conflicts  with  deni- 
ability.  In  areas  of  the  world  where  there  are  few  operating  firms, 
and  in  types  of  activity  which  have  only  limited  commercial  appeal, 
where  would  large-scale  enterprises  get  financing  but  from  the  United 
States  Government  ?  Operations  in  Laos  simply  could  not  be  concealed 
in  the  end.  This  experience  suggests  that  proprietaries  may  have  only 
limited  utility  in  future  paramilitary  operations. 

2.  The  Factor  of  Competition  with  Private  Enterprises 

Do  CIA  proprietaries  which  produce  income  compete  unfairly  with 
private  United  States  businesses  ?  Is  their  utility  to  the  Government  of 
such  magnitude  that  CIA  proprietaries  should  be  retained  regardless 
of  their  competitive  impact  ?  Generally,  the  Agency  believes  that  op- 
erating proprietaries  do  not  compete  with  United  States  private  enter- 
prise because  they  tend  to  do  things  which  private  companies  are  not 
equipped,  motivated,  or  staffed  to  perform. 

For  example,  CIA  proprietaries  purchase  weapons,  foreign  arma- 
ments, and  technical  devices;  conduct  security  investigations;  purchase 
real  estate ;  insure  uninsurable  risks ;  train  foreign  police  forces ;  and 


252 

run  airlines  in  remote  areas  or  on  commercially  unattractive  routes. 
Would  private  enterprise  do  any  or  all  of  these  things  ?  It  is  true  that 
private  contracts  with  the  Government  include  highly  sensitive  con- 
tracts with  the  CIA  for  technical  intelligence  collection,  research,  and 
development.  Would  the  abandonment  of  CIA  proprietaries  and  the 
cooperation  of  private  firms  be  more  desirable  in  terms  of  policy, 
economy  or  flexibility  ? 

3.  Relative  Scarcity  of  Corrvmercial  and  Official  Cover 

The  continuing  CIA  desire  for  more  notionals  reflects  the  scarcity 
of  United  States  Government  official  cover  in  many  areas  of  the  world, 
and  the  developing  desire  of  some  United  States  companies  not  to 
cooperate  with  the  Agency. 

4.  Profits 

Some  questions  concerning  profits  have  been  raised.  Does  proprie- 
tary profit  constitute  a  significant  addition  to  the  resources  available 
to  CIA  ?  How  is  such  profit  treated  in  the  budget  ?  How  is  it  controlled  ? 
How  can  the  Congress  (or  the  President,  for  that  matter)  be  sure  that 
proprietary  profits  are  not  diverted  to  projects  not  included  in  the 
regular  CIA  budget  ? 

First,  profits  (defined  as  net  income  to  a  proprietary  after  deduc- 
tion of  operating  expenses)  are  relatively  small.  Even  in  the  days 
when  the  most  profitable  air  proprietaries  were  operating  at  peak 
capacity,  the  most  that  any  single  firm  netted  was  less  than  $4  million. 
Over  the  entire  period  1947-1975,  total  profits  have  been  $50  million, 
an  average  of  about  $1.6  million  annually,  for  the  16  biggest  CIA 
proprietaries.  And  in  these  years,  a  net  loss  was  sustained  three  times — 
$2.5  million  in  1971 ;  $0.5  million  in  1973 ;  and  $0.3  million  in  1975. 

Looking  to  the  future,  after  liquidation  of  the  air  proprietaries  has 
been  completed,  there  is  forecast  to  be  only  one  profitable  proprietary : 
the  complex  of  insurance  companies  which  derives  most  of  its  profit 
from  investment  portfolios.  This  entity's  net  income  in  1974  was  less 
than  $2  million  and  a  profit  of  this  general  magnitude  is  expected  in 
the  foreseeable  future.  These  profits  are  to  be  used  only  for  the  in- 
surance, escrow,  annuity  and  related  complex  functions.  Neither  the 
complex,  nor  profits  accruing  to  it,  are  used  for  operational  support  of 
any  other  projects  or  activities.  Nevertheless  profits  from  all  proprie- 
taries may  be  reprogrammed  into  CIA  operations  due  to  a  "change  in 
policy"  reflected  in  the  General  Counsel's  decision  of  February  3, 
1975.^°  Thus  proprietaries  do  not  presently  provide  a  mechanism  for 
"back  door"  funding  of  covert  operations ;  nor  are  they  currently  in- 
tended to  do  so.^^ 

The  current  Chief  of  CCS  noted  that : 

It  may  be  the  questions  that  have  been  raised  by  the  staffs 
of  this  Committee  and  of  the  House  Committee,  have  kind  of 
energized  certain  action  as  far  as  our  Comptroller  is  con- 
cerned, as  far  as  the  Office  of  Management  and  Budget  is 
concerned,  and  a  methodology  is  being  developed  at  the  pres- 
ent time  that  the  balance  sheets  of  the  salient  information  of 


*°  Chief,  CCS,  1/27/76,  pp.  80-81. 
""  IU6,.,  p.  79. 


253 

the  operation  of  proprietaries,  particularly  those  that  are 
having  earnings,  are  annexed  to  the  budgetary  presentation 
process  and  review  process,  so  that  this  information  is  avail- 
able to  the  Office  of  Management  and  Budget,  and  I  assume 
to  Congress,  so  that  this  can  be  taken  into  consideration. 

And  you  would  then  have,  it  seems  to  me,  a  degree  of  safe- 
guard that  money  cannot  be  taken  out  of  there  and  used  as 
an  add-on  to  appropriated  funds.''^ 

According  to  the  testimony,  from  1973  to  1975,  before  the  opinion 
was  rendered  by  the  General  Counsel  of  the  CIA  concerning  profits 
and  their  treatment,  the  Appropriations  Committees  were  advised 
that  such  profits  existed,  and  "it  was  taken  into  consideration  at  the 
time  of  appropriations." 

In  the  future,  I  would  think  that  any  oversight  committee 
could  very  promptly  bring  to  the  attention  of  the  DCI  their 
interest  in  this  question  of  profit,  and  ask  for  an  accounting, 
and  certainly  could  be  assured  that  there  Avas  no  use  of  funds 
derived  from  a  proprietary  for  an  operational  purpose  un- 
related to  such  activity. 

I  would  think  .  .  .  the  DCI  would  be  under  the  same 
prohibition  using  funds  that  were  appropriated  for  the  in- 
telligence directorate  for  operational  purposes  or  any  other 
comparable  redesignation  of  f  unds.^^ 

When  asked  whether  funds  built  up  in  a  complex  such  as  the  in- 
surance proprietary  should  be  used  for  purposes  beyond  those  in- 
cluded in  an  annual  authorization,  an  Agency  representatiA^e  replied : 

I  would  xiew  them  as  segregated  funds  to  the  extent  that 
there  was  a  profit,  unnecessary  for  the  purposes  of  the  propri- 
etary, that  the  profit  would  have  to  be  turned  over  to  the 
Treasury  and  it  could  not  be  used  for  other  Agency 
programs.''* 

As  for  the  treatment  in  the  budget,  there  are  both  policy  and  pro- 
cedural aspects.  The  policy  of  CIA  was  changed  by  the  February  1975 
General  Counsel  ruling  that  profits  of  proprietaries  and  proceeds  of 
liquidation  must  be  returned  to  the  Treasury  as  miscellaneous  receipts, 
and  cannot  be  used  to  augment  the  Contingency  Reserve  or  otherwise 
be  applied  to  operations.  This  ruling  overturned  the  practice  of  the 
past  which  on  occasion  included  the  transfer  of  proprietaries'  net 
proceeds  to  the  Contingency  Reserve  for  later  release  to  operations. 

The  budgetary  presentation  and  review  procedures  only  partially 
focus  upon  proprietary  profits.  The  insurance  complex's  profits  are 
invisible  in  the  Agency  budget;  they  are  taken  into  account  and  subject 
to  scrutiny  only  within  CIA.  Operationally,  the  Directorate  of  Opera- 
tion's annual  review  has  the  most  detailed  grasp  of  these  monies  at  the 
Agency  review  levels.  A  standard  set  of  public  enterprise  fund  sched- 
ules, as  prescribed  by  OMB  Circular  A-11,  would  be  appropriate  for 
making  this  complex  visible  in  the  Agency  budget.  Other  commercial 
proprietaries  should  show  these  schedules  as  well.  The  Agency  has  in- 

'-  Ibid.  pp.  82-83. 

""  IMd.  p.  84. 

"  lUd.  pp.  84-85. 


"         254 

dicated  that  the  Comptroller  is  working  with  the  Directorates  of  Op- 
erations and  Administration  to  develop  more  comprehensive  budget- 
ary presentation  and  review  procedures  for  CIA  proprietaries. 

To  what  extent  can  these  new  procedures  prevent  abuses  of  pro- 
prietary profits  ?  To  what  extent  do  they  preclude  the  need  for  legisla- 
tion in  this  area?  What  form  of  Congressional  oversight  is  needed 
here ;  at  what  point  should  Congress  exert  control. 

Improvement  of  visibility  in  the  budget  of  proprietary  resources 
and  provision  for  review  of  the  major  proprietaries  as  a  regular  part 
of  budget  review  by  CIA,  OMB,  and  Congressional  Committees  would 
seem  to  preclude  most  of  the  dangers  of  abuse.  On  the  other  hand,  there 
is  one  type  of  abuse  for  which  additional  Congressional  scrutiny  and 
safeguards  may  be  needed :  the  possibility  of  a  small-scale,  high-risk 
covert  project  directed  by  the  President  or  DCI  which  is  not  covered 
by  the  regular  appropriation  but  financed  by  proprietary  profits. 
While  no  foolproof  preventives  can  be  designed  by  law  or  regulation, 
the  possibility  of  such  abuse,  or  the  avoidance  of  congressional  review, 
can  be  minimized  by  requiring  that  all  CIA  proprietaries  report  opera- 
tional activities  to  the  congressional  oversight  committee.^'^ 

5.  Private  Investment  hy  CIA 

Two  types  of  general  issues  are  raised  by  investments  made  by  the 
Agency : 

( 1 )  Should  the  CIA  engage  in  investments  which  could  accumulate 
funds  outside  the  budget  process  and  thus  be  available  for  operations 
that  have  no  public  scrutiny  outside  CIA  ? 

(2)  Is  CIA  investment  policy  too  restrictive  in  regard  to  bank  de- 
posits ?  Specifically,  should  the  CIA  place  large  amounts  of  money  in 
commercial  banks  without  drawing  interest  ? 

A  sizable  percentage  of  the  Agency's  annual  appropriated  and 
advanced  funds  are  deposited  here  and  abroad  in  commercial  accounts 
on  an  incremental  basis  to  fund  operational  needs.  If  accounts  are 
maintained  at  levels  above  the  minimum  balance  necessary  for  offset 
costs  to  the  bank,  the  banks  selected  earn  an  interest  or  investment 
bonus.  The  selection  of  these  institutions  is  non-competitive,  rooted  in 
historic  circumstance,  albeit  in  institutions  that  have  shown  them- 
selves flexible  and  responsive  in  providing  the  Agency  services.  Fur- 
ther investigation  of  this  area  is  needed,  and  we  encourage  the  new 
oversight  committee  to  study  this  issue  in  greater  detail  than  we  have 
been  able.  This  is  one  area  where  the  exclusion  of  the  General  Ac- 
counting Office  from  CIA  audits  has  had  an  unfortunate  effect:  there 
is  no  outside  reviewer  of  a  complex  set  of  financial  records  and,  con- 
sequently, confidence  in  the  Agency's  role  in  this  area  may  have  been 
eroded. 

6.  What  is  the  Future  for  Proprietaries? 

No  new  proprietaries  are  in  formation  or  planned.  This  past  fiscal 
year,  1975,  one  new  proprietary  was  created  which  rented  office  space 
for  an  East  Coast  CIA  base  and  provided  cover  for  Agency  employees. 
The  main  provision  for  new  growth  is  the  plan  of  some  years  standing 
for  establishment   in  the   insurance   complex   of  several   corporate 

*  See  Recommendation  50. 


256 

"sliells"  i.e.,  legally  constituted  and  registered  companies  that  do 
very  little  commercial  business  but  which  can  be  adapted  to  various 
new  CIA  missions.  To  adapt  to  these  new  missions,  as  noted,  would 
require  CIA  to  amend  the  insurance  complex  Administrative  Plan. 
But  this  could  be  done  quickly ;  the  existence  of  the  shells  avoids  the 
leadtime  of  creating  new  corporate  entities,  with  all  the  complications 
of  local  laws  and  risk  of  exposure. 

While  CIA  proprietaries  are  now  smaller  than  previously,  they  are 
so  largely  for  administrative  reasons,  i.e.,  response  to  executive  branch 
directions.  Although  the  CIA  may  never  find  proprietary  expansion 
to  be  operationally  desirable,  there  is  currently  no  statutory  constraint 
on  such  expansion.  Congress  should  be  a  partner  in  the  process  of 
reviewing  any  such  expansion  by  providing  for  changes  in  the  charter 
process.  Another  approach  is  establishing  substantive  guidelines  for 
proprietary  operation.  This  approach  is  typified  by  the  post-Katzen- 
bach  guidelines  that  prohibit  CIA  operation  of  tax-exempt  foun- 
dations. 

Lawrence  R.  Houston,  the  former  General  Counsel  of  the  Agency, 
was  intimately  involved  with  all  of  the  proprietaries  for  his  entire 
tenure  with  CIA.  Consequently,  his  views  have  been  invaluable  to 
the  Committee  in  reviewing  and  evaluating  the  history  and  the  role 
of  these  mechanisms.  In  the  coui'se  of  far-ranging  testimony  with  the 
Committee  on  several  occasions  Houston  concluded  that  proprietaries 
"should  be  the  last  resort  for  use  to  backstop  Agency  activities."  He 
grounded  his  opinion  on  the  fact  that : 

they  are  cumbersome.  To  be  properly  run  they  take  many, 
many  man-hours  of  many,  many  different  parts  of  the 
Agency,  so  they  are  expensive  in  man-hours.  There  are  built- 
in  difficulties  in  running  what  appears  to  be  a  normal  busi- 
ness for  operational  purposes.  There's  really  a  built-in  dichot- 
omy there  that  leads  to  a  continual  conflict  with  policies.  And 
due  to  the  number  of  people  involved,  there  is  a  security  prob- 
lem on  the  old  grounds  that  security  doesn't  go  by  the  mathe- 
matical increase  in  the  number  of  people.  It  goes  geometri- 
cally as  to  the  number  of  people,  the  security  risk.^'' 

This  assessment  appears  to  be  correct  based  on  the  evidence  reviewed 
by  the  committee. 

The  cu